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

SUMMARY: This proposed rule would establish 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, and

thus help to maintain stability in the spearmint oil market.

DATES: Comments must be received by February 6, 1997.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposed rule. Comments must be sent in triplicate to

the Docket Clerk, Fruit and Vegetable Division, AMS, USDA, room 2525,

South Building, P.O. Box 96456, Washington, D.C. 20090-6456. 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: 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 Caroline C. Thorpe, 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) 720-5127; 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 proposed rule is issued under Marketing

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

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

parts of Nevada and Utah). This marketing 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 proposed 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

proposed rule would establish 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 proposed 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 sections 985.50, 985.51, and

985.52 of the order, the Committee recommended the salable quantities

and allotment 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 proposed rule would establish 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 proposed rule

would limit 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 marketing 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 marketing order). Spearmint oil is also produced in the Midwest.

The production area covered by the marketing 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

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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.

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. Prior to 1980, grower prices for

Native spearmint oil were historically cyclical. For example, between

1971 and 1975 the price of Native spearmint oil increased from $3.00

per pound to $11.00 per pound. In contrast, under the marketing 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 proposed 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 309,440 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

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 percentages of 56 percent are based on anticipated supply

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

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

[[Page 944]]

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 proposed regulation, if adopted, would be similar to those

which have been issued in prior seasons. Costs to producers and

handlers resulting from this proposed 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

proposed rule, the Committee's marketing policy statement for the 1997-

98 marketing year has been reviewed by the Department. The Committee's

marketing policy statement, a requirement whenever the Committee

recommends volume regulations, fully meets the intent of the provisions

as set forth in 7 CFR Part 985.50. Conformity with other USDA

guidelines has also been reviewed and confirmed.

The establishment of these salable quantities and allotment

percentages would allow for anticipated market needs based on

historical sales, changes and trends in production and demand, and

information available to the Committee. Adoption of this proposed rule

would also provide spearmint oil producers with information on the

amount of oil which should be produced for next season.

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, 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 8 spearmint oil handlers subject to regulation under the

marketing order and approximately 250 producers of spearmint oil in the

regulated production area. Of the 250 producers, approximately 135

producers hold Class 1 (Scotch) oil allotment base, and approximately

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

agricultural service firms are defined by the Small Business

Administration (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.

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 for weed, insect, and disease

control. A normal spearmint 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 producing farm would thus have to have

considerable more acreage than would be planted to spearmint during any

given season. To remain economically viable with the added costs

associated with spearmint production, most spearmint producing farms

would fall into the category of large businesses.

Based on the Small Business Administration's definition of small

entities, the Committee estimates that none of the eight handlers

regulated by the order would be considered small entities as all are

national and multinational corporations involved in the buying and

selling of essential oils and the products of such essential oils. The

Committee also 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. Thus, a majority of handlers and

producers of Far West spearmint oil may not be classified as small

entities.

This proposed rule would establish the quantity of spearmint oil

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

handle for, producers during the 1997-97 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

sections 985.50, 985.51 and 985.52 of the order.

The 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 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.

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. Prior to 1980, grower prices for

Native spearmint oil were historically cyclical. For example, between

1971 and 1975 the price of Native spearmint oil increased from $3.00

per pound to $11.00 per pound. In contrast, under the marketing order,

prices have stabilized between $10.50 and $11.50 per pound for the past

ten years.

Alternatives to this 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 all available information, and believe that

the 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 would 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 duplicitous

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information collection by industry and public sector agencies. The

Department has not identified any relevant Federal rules that

duplicate, overlap, or conflict with this proposed rule.

Finally, 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. Interested persons are also

invited to submit information on the regulatory and informational

impacts of this action on small businesses.

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

respond to this proposal. All written comments received within the

comment period will be considered before a final determination is made

on this matter.

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

proposed to be 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 Sec. 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: December 31, 1996.

Robert C. Keeney,

Director, Fruit and Vegetable Division.

[FR Doc. 97-281 Filed 1-6-97; 8:45 am]

BILLING CODE 3410-02-P