Proposed Method for Setting the Sales Price Level for 1998-Crop Commodity Credit Corporation (CCC) Contract Additional Peanuts for Export Edible Use

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1446

RIN 0560-AFO1

Proposed Method for Setting the Sales Price Level for 1998-Crop

Commodity Credit Corporation (CCC) Contract Additional Peanuts for

Export Edible Use

AGENCY: Commodity Credit Corporation, USDA.

ACTION: Advanced notice of proposed rulemaking with request for

comments.

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SUMMARY: The purpose of this notice is to solicit comments concerning

the method for determining the minimum export edible sales price for

sales by the CCC of price support loan inventory of additional peanuts

and the actual CCC sales price for export edible use. Increasing

competition in the world edible peanut market and lack of consensus

within the peanut industry about the minimum export edible sales price

level require an evaluation of future levels and procedures for

establishing export edible sales prices.

DATES: Comments concerning the method of establishing the level of the

minimum export edible sales price for additional peanuts must be

received by September 30, 1997, in order to be assured consideration.

ADDRESSES: Comments must be submitted to the Director, Tobacco and

Peanuts Division, USDA, Farm Service Agency (FSA), STOP 0514, 1400

Independence Avenue, S.W., Washington, D.C. 20250-0514. All written

submissions will be made available for public inspection from 8:15 a.m.

to 4:45 p.m.; Monday through Friday, except holidays, in room 5750-

South Building, 1400 Independence Avenue, S.W., Washington, DC 20250-

0514.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Robison, FSA, USDA, STOP

0514, 1400 Independence Avenue, S.W., Washington, DC 20250-0514,

telephone 202-720-9255.

SUPPLEMENTARY INFORMATION: The establishment of a minimum price at

which additional peanuts owned or controlled by CCC may be sold for

use as edible peanuts in export markets is a discretionary action.

The announcement of that price provides producers and handlers with

information to facilitate the negotiation of private contracts for

the sale of additional peanuts for export.

An overly high price may discourage private sales. If too low, the

minimum price could have an unnecessary, adverse effect on prices paid

to producers for additional peanuts. The minimum price at which 1997

crop additional peanuts owned or controlled by CCC may be sold for use

as edible peanuts in export markets was established at $400 per short

ton (st) on April 30, 1997. This price was designed to encourage

exports while providing price stability for additional peanuts sold

under contract. It was also designed to assure handlers that CCC would

not undercut their export contracting efforts with offerings of

additional peanuts for export edible sales below the minimum sales

price.

During the 1997-crop comment period seven comments were received

concerning the minimum export edible sales price. Four suggested

keeping the price at $400 per st, and three suggested lowering it to

between $300 and $375 per st. Producer groups preferred keeping the

minimum price at $400 per ton while shellers preferred lowering it.

Since the 1997-crop comment period closed, several parties have

requested that USDA study the method of setting the export edible sales

price and its level. Competition in the world edible peanut market has

increased markedly in recent years. Production in Argentina rose about

65 percent between 1992 and 1996 and South African production is

expanding. With increased imports and annual reductions in domestic use

of peanuts, until the recent anticipated small increase, the

competitiveness of U.S. peanuts in world markets becomes more

important.

Because of these requests and the increasing competitiveness in

world edible peanut markets, industry and other comments are being

solicited before setting the 1998 marketing year (MY) minimum sales

price for additional peanuts sold for export use.

Several options exist for establishing the additional peanut export

edible sales price in 1998 and future years. These include: (1)

Maintaining the $400 per st level that has been in effect since 1986;

(2) lowering the level of the minimum export edible sales price; (3)

basing the minimum export edible sales price solely on some fixed

percentage of the average price for ``Segregation 1'' additional

peanuts delivered under contract for such MY; (4) establishing a

minimum level and setting the export edible price at the lower of an

absolute number or some percentage of the average price for

``Segregation 1'' additional peanuts delivered under contract for such

MY; (5) basing the export edible minimum price on a calculated

``world'' price of edible peanuts; (6) basing the export edible price

on the lower of an absolute number and a calculated ``world'' price of

edible peanuts; or (7) some combination of the above.

Setting the minimum export edible sales price as an absolute number

is the simplest and most straightforward. However, this method may not

adequately consider the effect of supply and demand variations in the

world marketplace.

Basing the minimum export edible sales price on the basis of the

average contract price for Segregation 1 peanuts delivered under

contract would capture some of the effects of change in the world

edible market. However, this technique could create greater uncertainty

and could complicate recordkeeping. This method of establishing the

minimum export edible sales price was used briefly in 1986 and could be

reestablished with or without modification for 1998 and subsequent

years. In 1986, in a February 14 press release and a March 5 press

release clarification, the original determination for the 1986 crop was

that the 1986-1990 crops of additional peanuts would be sold by CCC for

export edible use at no less than the lower of (1) $400 per ton, or (2)

102 percent of the average contract price by type for Segregation 1

additional peanuts delivered under contract, plus cost, including

inspection, warehousing, and shrinkage for such MYs as determined by

CCC. However, after this policy was announced early contracting of 1986

[[Page 43956]]

peanuts slowed. For that reason, on April 22, 1986, the policy was

changed to a minimum price of $400 per ton and this level has remained

in effect for 12 consecutive years.

A world price method of establishing the minimum export edible

sales price could be ideal for capturing the effects of change in

supply and demand in the world market. However, a lack of data for

calculating world prices could limit USDA's ability to accurately

capture the world price.

Comments on absolute levels for the minimum export sales price and

the method of calculating the price are being sought. Comments should

address whether USDA should continue to announce an absolute number, or

should a formula be used, or should an absolute number be used in

combination with a formula. If a formula is recommended, comments

should address what components should be included and how should the

components be weighed.

Following the receipt of comments, a proposed rule for the 1998

crop and for subsequent crops, if deemed appropriate, will be issued

which will allow for additional comment.

Comments are sought in particular on the following questions:

(1) Should the minimum CCC sales price for additional peanuts to be

sold from the price support loan inventory for export edible use from

the 1998 and future crops be changed?

(2) Should the $400 per st level that has been in effect since 1986

be changed?

(3) Should USDA switch to a formula to determine the minimum price

for additional loan peanuts sold for export edible use?

(4) Should the formula be based on a set percentage of the weighted

average contract price for additional peanuts for the current year?

(5) Should the formula be based on a set percentage of the world

price of peanuts converted to a ``Farmer Stock Basis'?

(6) Should a formula and absolute number both be used for setting

the export edible sales price?

(7) Should the formula be based on a combination of contract prices

and the world price for peanuts, and if so, what weight should contract

additional prices and world peanut prices be given in the formula?

Signed at Washington, DC, on August 7, 1997.

Bruce R. Weber,

Acting Executive Vice President, Commodity Credit Corporation.

[FR Doc. 97-21795 Filed 8-15-97; 8:45 am]

BILLING CODE 3410-05-P