Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; Limiting the Volume of Small Florida Red Seedless Grapefruit

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV97-905-1 PR]

Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;

Limiting the Volume of Small Florida Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on limiting the volume of

small red seedless grapefruit entering the fresh market under the

marketing order covering oranges, grapefruit, tangerines, and tangelos

grown in Florida. The marketing order is administered locally by the

Citrus Administrative Committee (committee). This rule would limit the

volume of size 48 and/or size 56 red seedless grapefruit handlers could

ship during the first 11 weeks of the 1997-1998 season that begins in

September. This proposal would provide a sufficient supply of small

sized red seedless grapefruit to meet market demand, without saturating

all markets with these small sizes. The committee believes this rule is

necessary to help stabilize the market and improve grower returns.

DATES: Comments must be received by August 13, 1997.

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; Fax: (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: William G. Pimental, Southeast

Marketing Field Office, AMS, USDA, P.O. Box 2276, Winter Haven, Florida

33883-2276; telephone: (941) 299-4770, Fax: (941) 299-5169; or Anne

Dec, Marketing Order Administration Branch, F&V, AMS, USDA, room 2522-

S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 720-

5053, 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,

room 2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone (202)

720-2491, Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing

Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR

part 905), regulating the handling of oranges, grapefruit, tangerines,

and tangelos grown in Florida, hereinafter referred to as the

``order.'' The marketing agreement and order are 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 12988, Civil

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

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 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.

The order provides for the establishment of grade and size

requirements for Florida citrus, with the concurrence of the Secretary.

These grade and size requirements are designed to provide fresh markets

with citrus fruit of acceptable quality and size. This helps create

buyer confidence and contributes to stable marketing conditions. This

is in the interest of growers, handlers, and consumers, and is designed

to increase returns to Florida citrus growers. The current minimum

grade standard for red seedless grapefruit is U.S. No. 1, and the

minimum size requirement is size 56 (at least 3\5/16\ inches in

diameter).

[[Page 40483]]

Section 905.52 of the order provides authority to limit shipments

of any grade or size, or both, of any variety of Florida citrus. Such

limitations may restrict the shipment of a portion of a specified grade

or size of a variety. Under such a limitation, the quantity of such

grade or size that may be shipped by a handler during a particular week

would be established as a percentage of the total shipments of such

variety by such handler in a prior period, established by the committee

and approved by the Secretary, in which the handler shipped such

variety.

Section 905.153 of the order provides procedures for limiting the

volume of small red seedless grapefruit entering the fresh market. The

procedures specify that the committee may recommend that only a certain

percentage of sizes 48 and/or 56 red seedless grapefruit be made

available for shipment into fresh market channels for any week or weeks

during the regulatory period. The 11 week period begins the third

Monday in September. Under such a limitation, the quantity of sizes 48

and/or 56 red seedless grapefruit that may be shipped by a handler

during a regulated week is calculated using the recommended percentage.

By taking the recommended weekly percentage times the average weekly

volume of red grapefruit handled by such handler in the previous five

seasons, handlers can calculate the volume of sizes 48 and/or 56 they

may ship in a regulated week.

This proposed rule would limit the volume of small red seedless

grapefruit entering the fresh market for each week of the 11 week

period beginning the week of September 15. The proposal would limit the

volume of sizes 48 and/or 56 red seedless grapefruit by establishing

the weekly percentage for each of the 11 weeks at 25 percent. This

action was recommended by the committee at its meeting on May 28, 1997,

by a vote of 10 in favor to 7 opposed.

For the past few seasons, returns on red seedless grapefruit have

been at all time lows, often not returning the cost of production. On

tree prices for red seedless grapefruit have declined steadily from

$9.60 per carton (3/5 bushel) during the 1989-90 season, to $3.45 per

carton during the 1994-95 season, to a low of $1.41 per carton during

the 1996-97 season. The committee believes that to stabilize the market

and improve returns to growers, demand for fresh red seedless

grapefruit must be stabilized and increased.

One problem contributing to the current state of the market is the

excessive number of small sized grapefruit shipped early in the

marketing season. During the past three seasons, sizes 48 and 56

accounted for 34 percent of total shipments during the 11 week

regulatory period, with the average weekly percentage exceeding 40

percent of shipments. This contrasts with sizes 48 and 56 representing

only 26 percent of total shipments for the remainder of the season.

While there is a market for early grapefruit, the shipment of large

quantities of small red seedless grapefruit in a short period

oversupplies the fresh market for these sizes and negatively impacts

the market for all sizes.

For the majority of the season, larger sizes return better prices

than smaller sizes. However, there is a push early in the season to get

fruit into the market to take advantage of the higher prices available

at the beginning of the season. The early season crop tends to have a

greater percentage of small sizes. This creates a glut of smaller,

lower priced fruit on the market that drives down the price for all

sizes. Early in the season, larger sized fruit commands a premium

price. In some cases, the f.o.b. is $4 to $6 a carton more than for the

smaller sizes. In early October, the f.o.b. for a size 27 averages

around $10.00 per carton. This compares to an average f.o.b. of $5.50

per carton for size 56. By the end of the 11 week period outlined in

this rule, the f.o.b. for large sizes has dropped to within two dollars

of the f.o.b. for small sizes.

In the past three seasons, during the period covered by this rule,

prices of red seedless grapefruit have fallen from a weighted average

f.o.b. of $7.80 per carton to an average f.o.b. of $5.50 per carton.

Even though later in the season the crop has sized to naturally limit

the amount of smaller sizes available for shipment, the price structure

in the market has already been negatively affected. In the past three

years, the market has not recovered, and the f.o.b. for all sizes fell

to around $5.00 to $6.00 per carton for most of the rest of the season.

The committee discussed this issue at length at several meetings.

The committee believes that the overshipment of smaller sized red

seedless grapefruit early in the season has contributed to below

production cost returns for growers and lower on tree values. An

economic study done by the University of Florida--Institute of Food and

Agricultural Sciences (UF-IFAS) in May 1997, found that on tree prices

have fallen from a high near $7.00 in 1991-92 to around $1.50 for this

past season. The study projects that if the industry elects to make no

changes, the on tree price will remain around $1.50. The study also

indicates that increasing minimum size restrictions could help to raise

returns.

The committee examined shipment data covering the 11 week

regulatory period for the last four seasons. The information contained

the amounts and percentages of sizes 48 and 56 shipped during each

week. They compared this information with tables outlining weekly

f.o.b. figures for each size. Based on this statistical information

from past seasons, the committee members believe there is an indication

that once shipments of sizes 48 and 56 reach levels above 250,000

cartons a week, prices decline on those and most other sizes of red

seedless grapefruit. Without volume regulation, the industry has been

unable to limit the shipments of small sizes. The committee believes

that if shipments of small sizes could be maintained at around 250,000

cartons a week, prices should stabilize and demand for larger, more

profitable sizes should increase.

The committee discussed at what level to establish the weekly

percentages. They wanted to recommend a weekly percentage that would

provide a sufficient volume of small sizes without adversely impacting

the markets for larger sizes. The committee recommended that the

percentage for each of the 11 weeks be established at the 25 percent

level. This percentage, when combined with the average weekly shipments

for the total industry, would provide a total industry allotment of

244,195 cartons of sizes 48 and/or 56 red seedless grapefruit per

regulated week. This percentage would allow the total shipments of

small red seedless grapefruit to approach the 250,000 carton mark

during regulated weeks without exceeding it.

In its deliberations, the committee also recognized that if crop

and market conditions should change, the committee could recommend that

the percentage be increased or eliminated to provide for the shipment

of more small sizes in any one, or all of the 11 weeks. While the

official crop estimate will not be available until October, information

in the UF-IFAS study and committee discussions indicate that the 1997-

98 season production will be near or greater than the 1996-97 estimate

of 30.8 million boxes (1\3/5\ bushel) of red seedless grapefruit.

Committee members also stated that the crop is sizing well and should

produce a greater number of larger sizes than the past season. Using

this information on the 1997-98 crop, the committee members thought

that establishing a weekly percentage of 25 percent would provide

enough small sizes to supply those markets without disrupting the

markets for larger sizes.

[[Page 40484]]

Under the procedures in section 905.153, the quantity of sizes 48

and/or 56 red seedless grapefruit that may be shipped by a handler

during a regulated week would be calculated using the recommended

percentage of 25 percent. By taking the 25 percent weekly percentage

times the average weekly volume of red grapefruit handled by such

handler in the previous five seasons, handlers can calculate the volume

of sizes 48 and/or 56 they may ship in a regulated week.

An average week has been calculated by the committee for each

handler using the following formula. The total red seedless grapefruit

shipments by a handler during the 33 week period beginning the third

Monday in September and ending the first Sunday in May during the

previous five seasons are added and divided by five to establish an

average season. This average season was then divided by the 33 weeks in

a season to derive the average week. This average week would be the

base for each handler for each of the 11 weeks contained in the

regulation period. The weekly percentage, in this case, 25 percent, is

multiplied by a handler's average week. The total is that handler's

allotment of sizes 48 and/or 56 red seedless grapefruit for the given

week.

Under this proposed rule, the calculated allotment is the amount of

small sized red seedless grapefruit a handler could ship. If the

minimum size established under section 905.52 remains at size 56,

handlers could fill their allotment with size 56, size 48, or a

combination of the two sizes such that the total of these shipments are

within the established limits. If the minimum size under the order is

48, handlers could fill their allotment with size 48 fruit such that

the total of these shipments are within the established limits. The

committee staff would perform the specified calculations and provide

them to each handler.

To illustrate, suppose Handler A shipped a total of 50,000 cartons,

64,600 cartons, 45,000 cartons, 79,500 cartons, and 24,900 cartons of

red seedless grapefruit in the last five seasons, respectively. Adding

these season totals and dividing by five yields an average season of

52,800 cartons. The average season would then be divided by 33 weeks to

yield an average week, in this case, 1,600 cartons. This would be

Handler A's base. The weekly percentage of 25 percent would then be

applied to this amount. This would provide this handler with a weekly

allotment of 400 cartons (1,600 x .25) of size 48 and/or 56.

The average week for handlers with less than five previous seasons

of shipments would be calculated by the committee by averaging the

total shipments for the seasons they did ship red seedless grapefruit

during the immediately preceding five years and dividing that average

by 33. New handlers with no record of shipments would have no prior

period on which to base their average week. Therefore, under this

proposal, a new handler could ship small sizes equal to 25 percent of

their total volume of shipments during their first shipping week. Once

a new handler has established shipments, their average week will be

calculated as an average of the weeks they have shipped during the

current season.

This proposed rule would establish a weekly percentage of 25

percent for each of the 11 weeks to be regulated. The regulatory period

runs from the third Monday in September (September 15, 1997) through

the last Sunday in November (November 30, 1997). Each regulation week

would begin Monday at 12:00 a.m. and end at 11:59 p.m. the following

Sunday, since most handlers keep records based on Monday being the

beginning of the work week. If necessary, the committee could meet and

recommend a percentage above 25 percent to the Secretary at any time

during the regulatory period.

The rules and regulations contain a variety of provisions designed

to provide handlers with some marketing flexibility. When regulation is

established by the Secretary for a given week, the committee calculates

the quantity of small red seedless grapefruit which may be handled by

each handler. Section 905.153(d) provides allowances for overshipments,

loans, and transfers of allotment. These allowances should allow

handlers the opportunity to supply their markets while limiting the

impact of small sizes on a weekly basis.

During any week for which the Secretary has fixed the percentage of

sizes 48 and/or 56 red seedless grapefruit, any handler could handle an

amount of sizes 48 and/or 56 red seedless grapefruit not to exceed 110

percent of their allotment for that week. The quantity of overshipments

(the amount shipped in excess of a handler's weekly allotment) would be

deducted from the handler's allotment for the following week.

Overshipments would not be allowed during week 11 because there would

be no allotments the following week from which to deduct the

overshipments.

If handlers fail to use their entire allotments in a given week,

the amounts undershipped would not be carried forward to the following

week. However, a handler to whom an allotment has been issued could

lend or transfer all or part of such allotment (excluding the

overshipment allowance) to another handler. In the event of a loan,

each party would, prior to the completion of the loan agreement, notify

the committee of the proposed loan and date of repayment. If a transfer

of allotment is desired, each party would promptly notify the committee

so that proper adjustments of the records could be made. In each case,

the committee would confirm in writing all such transactions prior to

the following week. The committee could also act on behalf of handlers

wanting to arrange allotment loans or participate in the transfer of

allotment. Repayment of an allotment loan would be at the discretion of

the handlers party to the loan.

The committee would compute each handler's allotment by multiplying

the handler's average week by the percentage established by regulation

for that week. The committee would notify each handler prior to that

particular week of the quantity of sizes 48 and 56 red seedless

grapefruit such handler could handle during a particular week, making

the necessary adjustments for overshipments and loan repayments.

This rule does not affect the provision that handlers may ship up

to 15 standard packed cartons (12 bushels) of fruit per day exempt from

regulatory requirements. Fruit shipped in gift packages that are

individually addressed and not for resale, and fruit shipped for animal

feed are also exempt from handling requirements under specific

conditions. Also, fruit shipped to commercial processors for conversion

into canned or frozen products or into a beverage base are not subject

to the handling requirements under the order.

During committee deliberations, several concerns were raised

regarding this proposed regulation. One area of concern was the

possible impact this regulation may have on exports. Several members

stated that there is a strong demand in some export markets for small

sizes. Other members responded that the percentage set should allow

handlers enough volume of small sizes to meet the demand in these

markets. It was also stated that any shortfall an individual handler

might have could be filled by loan or transfer. There was also some

discussion that markets that normally demand small sizes have shown a

willingness to purchase larger sizes. In addition, committee data

indicate that the majority of export shipments occur after the 11 week

[[Page 40485]]

period when there are no restrictions on small sizes.

Another concern raised was the effect this proposal may have on

packouts. It was stated that this rule could reduce the volume packed,

resulting in higher packinghouse costs. The purpose of this rule is to

limit the volume of small sizes marketed early in the season. Larger

sizes could be substituted for smaller sizes with a minimum effect on

overall shipments. This rule may require more selective picking of only

the sizes desired, something that many growers are doing already. The

UF-IFAS study presented indicated that it would increase returns if

growers would harvest selectively and return to repick groves as the

grapefruit sized. This also would allow growers to maximize returns on

fresh grapefruit by not picking unprofitable grades and sizes of red

grapefruit that would be sent to the less profitable processing market.

The study also indicated that selective harvesting can reduce the

f.o.b. cost per carton. Therefore, this action should have a positive

impact on grower returns.

Several members were concerned about what would happen if market

conditions were to change. Other committee members responded that if

industry conditions were to change (for example, if there was a freeze,

or if the grapefruit was not sizing), the committee would meet and

recommend that the percentage be raised to allow for more small sizes,

or that the limits be removed all together.

Another concern raised was that market share could be lost to

Texas. According to the Economic Analysis Branch (EAB), of the Fruit

and Vegetable Division, of the Agricultural Marketing Service (AMS),

limiting shipments of small Florida grapefruit would probably not

result in a major shift to Texas grapefruit because the Texas industry

is much smaller and would have higher freight costs to some markets

supplied by Florida. The UF-IFAS study made similar findings. Texas

production is much smaller and has been susceptible to freezes that

take it out of the market. This has lessened its impact on the overall

grapefruit market.

One handler expressed that they ship early in the season and this

action could be very restrictive. Members responded that the

availability of loans and transfers would address these concerns. There

was also discussion of how restrictive this proposal would actually be.

Based on shipments from the past four seasons, available allotment

would have exceeded actual shipments for each of the first three weeks

that would be regulated under this rule. In the three seasons prior to

last season, if a 25 percent restriction on small sizes had been

applied during the 11 week period, only an average of 4.2 percent of

overall shipments during that period would have been affected. A large

percentage of this volume most likely could have been replaced by

larger sizes. A sufficient volume of small sized red grapefruit would

still be allowed into all channels of trade, and allowances would be in

place to help handlers address any market shortfall.

After considering the concerns expressed, and the available

information, the committee determined that this rule was needed to

regulate shipments of small sized red seedless grapefruit.

Section 8(e) of the Act requires that whenever grade, size, quality

or maturity requirements are in effect for certain commodities under a

domestic marketing order, including grapefruit, imports of that

commodity must meet the same or comparable requirements. This rule does

not change the minimum grade and size requirements under the order,

only the percentages of sizes 48 and/or 56 red grapefruit that may be

handled. Therefore, no change is necessary in the grapefruit import

regulations as a result of this action.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), AMS has considered the economic impact of this action on

small entities. Accordingly, AMS has prepared this initial 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 approximately 80 handlers subject to regulation under the

order and approximately 11,000 growers of citrus in the regulated area.

Small agricultural service firms, which includes handlers, have been

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 are defined as those having annual receipts of

less than $500,000.

Based on the Florida Agricultural Statistics Service and committee

data for the 1995-96 season, the average annual f.o.b. price for fresh

Florida red grapefruit during the 1995-96 season was $5.00 per 4/5

bushel cartons for all grapefruit shipments, and the total shipments

for the 1995-96 season were 23 million cartons of grapefruit.

Approximately 20 percent of all handlers handled 60 percent of Florida

grapefruit shipments. In addition, many of these handlers ship other

citrus fruit and products which are not included in committee data but

would contribute further to handler receipts. Using the average f.o.b.

price, about 80 percent of grapefruit handlers could be considered

small businesses under SBA's definition and about 20 percent of the

handlers could be considered large businesses. The majority of Florida

grapefruit handlers, and growers may be classified as small entities.

The committee believes that the overshipment of smaller sized red

seedless grapefruit early in the season has contributed to below

production cost returns for growers and lower on tree values. For the

past few seasons, returns on red seedless grapefruit have been at all

time lows, often not returning the cost of production. On tree prices

for red seedless grapefruit have declined steadily from $9.60 per

carton (3/5 bushel) during the 1989-90 season, to $3.45 per carton

during the 1994-95 season, to a low of $1.41 per carton during the

1996-97 season. The committee believes that to stabilize the market and

improve returns to growers, demand for fresh red seedless grapefruit

must be stabilized and increased.

Under the authority of section 905.52 of the order, this proposed

rule would limit the volume of small red seedless grapefruit entering

the fresh market for each week of the 11 week period beginning the week

of September 15. The proposal would limit the volume of sizes 48 and/or

56 red seedless grapefruit by establishing the weekly percentage for

each of the 11 weeks at 25 percent. Under such a limitation, the

quantity of sizes 48 and/or 56 red seedless grapefruit that may be

shipped by a handler during a particular week is calculated using the

recommended percentage. By taking the recommended percentage times the

average weekly volume of red grapefruit handled by such handler in the

previous five seasons, the committee would calculate a handler's weekly

allotment of small sizes. This proposal would provide a supply of small

sized red seedless grapefruit sufficient to meet market demand, without

saturating all markets with these small sizes. The committee believes

this rule is necessary to help stabilize the market and improve grower

returns.

At the meeting, there was discussion regarding the expected impact

of this

[[Page 40486]]

change on handlers and growers in terms of cost. Discussion focused on

the possibility that market share would be lost to Texas and that this

proposed rule could increase packinghouse costs. According to EAB,

limiting shipments of small Florida grapefruit would probably not

result in a major shift to Texas grapefruit because the Texas industry

is much smaller and would have higher freight costs to some markets

supplied by Florida. The UF-IFAS study made similar findings. Texas

production is much smaller and has been susceptible to freezes that

take it out of the market. This has lessened its impact on the overall

grapefruit market.

The concern about packinghouse costs was that this proposal would

mean lower packouts which may increase cost. However, the availability

of loans and transfers would provide some flexibility. Also, this

proposal would only affect small sizes and only during the 11 week

period. By substituting larger sizes and using loans and transfers,

packouts should approach the weekly volume of seasons prior to this

proposal.

The weekly percentage of 25 percent, when combined with the average

weekly shipments for the total industry, would provide a total industry

allotment of 244,195 cartons of sizes 48 and/or 56 red seedless

grapefruit per regulated week. Based on shipments from the past four

seasons, the total available weekly allotment of 244,195 cartons would

exceed actual shipments for each of the first three weeks that would be

regulated under this rule. In addition, if a 25 percent restriction on

small sizes had been applied during the 11 week period in the three

seasons prior to last season, an average of 4.2 percent of overall

shipments during that period would have been affected. A large

percentage of this volume most likely could have been replaced by

larger sizes. Under this proposal a sufficient volume of small sized

red grapefruit would still be allowed into all channels of trade, and

allowances would be in place to help handlers address any market

shortfall. Therefore, the overall impact on total seasonal shipments

and on industry cost should be minimal.

The committee also discussed the state of the market and the cost

of doing nothing. During the past three seasons, sizes 48 and 56

accounted for 34 percent of total shipments during the 11 week

regulatory period, with the average weekly percentage exceeding 40

percent of shipments. For the remainder of the season, sizes 48 and 56

represent only 26 percent of total shipments. While there is a market

for early grapefruit, the shipment of large quantities of small red

seedless grapefruit in a short period oversupplies the fresh market for

these sizes and negatively impacts the market for all sizes.

The early season crop tends to have a greater percentage of small

sizes. The large volume of smaller, lower priced fruit drives down the

price for all sizes. Early in the season, larger sized fruit commands a

premium price. In some cases, the f.o.b. is $4 to $6 a carton more than

for the smaller sizes. In early October, the f.o.b. for a size 27

averages around $10.00 per carton. This compares to an average f.o.b.

of $5.50 per carton for size 56. By the end of the 11 week period

outlined in this rule, the f.o.b. for large sizes has dropped to within

two dollars of the price for small sizes.

In the past three seasons, during the period covered by this rule,

prices of red seedless grapefruit have fallen from a weighted average

f.o.b. of $7.80 per carton to an average f.o.b. of $5.50 per carton.

Even though later in the season the crop has sized to naturally limit

the amount of smaller sizes available for shipment, the price structure

in the market has already been negatively affected. This leaves the

f.o.b. for all sizes around $5.00 to $6.00 per carton for the rest of

the season.

As previously stated, the on tree price of red seedless grapefruit

has also been falling. On tree prices for fresh red seedless grapefruit

have declined steadily from $9.60 per carton during the 1989-90 season,

to $3.45 per carton during the 1994-95 season, to a low of $1.41 per

carton during the 1996-97 season. In many cases, prices during the past

two seasons have provided returns less than production costs. This

price reduction could force many small growers out of business. If no

action is taken, the UF-IFAS study indicates that on tree returns would

remain at levels around $1.50.

This proposal would provide a supply of small sized red seedless

grapefruit to meet market demand, without saturating all markets with

these small sizes. The committee believes that if the supply of small

sizes were limited early in the season, prices could be stabilized at a

higher level. This would provide increased returns for growers. In

addition, if more small grapefruit were allowed to remain on the tree

to increase in size and maturity, it could provide greater returns to

growers.

The committee surveyed shipment data covering the 11 week

regulatory period for the last four seasons and examined tables

outlining weekly f.o.b. figures for each size. The committee believes

that if shipments of small sizes could be maintained at around 250,000

cartons a week, prices should stabilize and demand for larger, more

profitable sizes should increase. The weekly percentage of 25 percent,

when combined with the average weekly shipments for the total industry,

would provide a total industry allotment of 244,195 cartons of sizes 48

and/or 56 red seedless grapefruit per regulated week. A stabilized

price that returns a fair market value would be beneficial to both

small and large growers and handlers.

This rule may require more selective picking of only the sizes

desired, something that many growers are doing already. The UF-IFAS

study indicated that returns could increase if growers would harvest

selectively and return to repick groves as the grapefruit sized. This

also would allow growers to maximize returns on fresh grapefruit by not

picking unprofitable grades and sizes of red grapefruit that would be

sent to the less profitable processing market. The study indicated that

selective harvesting can reduce the f.o.b. cost per carton. The study

also indicates that increasing minimum size restrictions could help to

raise returns.

Fifty-nine percent of red seedless grapefruit is shipped to fresh

market channels. There is a processing outlet for grapefruit not sold

into the fresh market. However, the vast majority of processing is

squeezing the grapefruit for juice. Because of the properties of the

juice of red seedless grapefruit, including problems with color, the

processing outlet is limited, and not currently profitable. Therefore,

it is essential that the market for fresh red grapefruit be fostered

and maintained. Any costs associated with this action would only be for

the 11 week regulatory period. However, benefits from this action could

stretch throughout the entire 33 week season. Even if this action was

successful only in raising returns a few pennies a carton, when applied

to 34 million cartons of red seedless grapefruit shipped to the fresh

market, the benefits should more than outweigh the costs.

The limits that would be established under this action would be

based on percentages applied to a handler's average week. This process

was established by the committee because it was the most equitable.

Also, all handlers would have access to loans and transfers. All

handlers and growers would benefit from increased returns. The costs or

benefits of this rule are not expected to be disproportionately more or

less for small handlers or growers than for larger entities.

[[Page 40487]]

The committee discussed alternatives to this action. The committee

discussed eliminating shipments of size 56 grapefruit all together.

Several members expressed that there is a market for size 56

grapefruit. Members favored the percentage rule recommended because it

would supply a sufficient quantity of small sizes should there be a

demand for size 56. Therefore, the motion to eliminate size 56 was

rejected. Another alternative discussed was to do nothing. However, the

committee rejected this option, taking in account that returns would

remain stagnant without action.

This rule would change the requirements under the Florida citrus

marketing order. Handlers utilizing the flexibility of the loan and

transfer aspects of this action would be required to submit a form to

the committee. The rule would increase the reporting burden on

approximately 80 handlers of red seedless grapefruit who would be

taking about 0.03 hour to complete each report regarding allotment

loans or transfers. The information collection requirements contained

in this section have been approved by the Office of Management and

Budget (OMB) under the provisions of the Paperwork Reduction Act of

1995 (Pub. L. 104-13) and assigned OMB number 0581-0094. As with all

Federal marketing order programs, reports and forms are periodically

reviewed to reduce information requirements and duplication by industry

and public sector agencies.

The Department has not identified any relevant Federal rules that

duplicate, overlap or conflict with this proposed rule. However, red

seedless grapefruit must meet the requirements as specified in the U.S.

Standards for Grades of Florida Grapefruit (7 CFR 51.760 through

51.784) issued under the Agricultural Marketing Act of 1946

(7 U.S.C. 1621 through 1627).

In addition, the committee's meeting was widely publicized

throughout the citrus industry and all interested persons were invited

to attend the meeting and participate in Committee deliberations on all

issues. Like all Committee meetings, the May 28, 1997, meeting was a

public meeting and all entities, both large and small, were able to

express views on this issue. Interested persons are invited to submit

information on the regulatory and informational impacts of this action

on small businesses.

A 15-day comment period is provided to allow interested persons to

respond to this proposal. Fifteen days is deemed appropriate because

this rule would need to be in place as soon as possible since handlers

will begin shipping grapefruit in September. In addition, because of

the nature of this rule, handlers need time to consider their allotment

and how best to service their customers. Also, the industry has been

discussing this issue for some time. The committee has kept the

industry well informed on this issue. It has also been widely discussed

at various industry and association meetings. Interested persons have

had time to determine and express their positions. All written comments

timely received will be considered before a final determination is made

on this matter.

List of Subjects in 7 CFR Part 905

Grapefruit, Marketing agreements, Oranges, Reporting and

recordkeeping requirements, Tangelos, Tangerines.

For the reasons set forth in the preamble, 7 CFR part 905 is

proposed to be amended as follows:

PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN

FLORIDA

1. The authority citation for 7 CFR Part 905 continues to read as

follows:

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

2. In Sec. 905.306, paragraphs (a) and (b), the word ``During'' is

removed and the words ``Except as otherwise provided in section

905.601, during'' are added in its place.

3. A new Sec. 905.601 is added to read as follows:

Sec. 905.601 Red seedless grapefruit regulation 101.

The schedule below establishes the weekly percentages to be used to

calculate each handler's weekly allotment of small sizes. If the

minimum size in effect under section 905.306 for red seedless

grapefruit is size 56, handlers can fill their allotment with size 56,

size 48, or a combination of the two sizes such that the total of these

shipments are within the established weekly limits. If the minimum size

in effect under section 905.306 for red seedless grapefruit is 48,

handlers can fill their allotment with size 48 red seedless grapefruit

such that the total of these shipments are within the established

weekly limits. The weekly percentages for sizes 48 and/or 56 red

seedless grapefruit grown in Florida, which may be handled during the

specified weeks are as follows:

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

Weekly

Week percentage

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

(a) 9/15/97 through 9/21/97................................. 25

(b) 9/22/97 through 9/28/97................................. 25

(c) 9/29/97 through 10/5/97................................. 25

(d) 10/6/97 through 10/12/97................................ 25

(e) 10/13/97 through 10/19/97............................... 25

(f) 10/20/97 through 10/26/97............................... 25

(g) 10/27/97 through 11/2/97................................ 25

(h) 11/3/97 through 11/9/97................................. 25

(i) 11/10/97 through 11/16/97............................... 25

(j) 11/17/97 through 11/23/97............................... 25

(k) 11/24/97 through 11/30/97............................... 25

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

Dated: July 25, 1997.

Ronald L. Cioffi,

Acting Director, Fruit and Vegetable Division, Agricultural Marketing

Service.

[FR Doc. 97-20034 Filed 7-25-97; 1:13 pm]

BILLING CODE 3410-02-U