Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 1998-99 Marketing Year

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV-98-985-1 PR]

Marketing Order Regulating the Handling of Spearmint Oil Produced

in the Far West; Salable Quantities and Allotment Percentages for the

1998-99 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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

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 1998-99 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 January 23, 1998.

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 Programs, AMS, USDA, room 2525-S,

P.O. Box 96456, Washington, D.C. 20090-6456; Fax: (202) 205-6632.

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 Programs, 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 Programs, AMS, USDA, room 2525-S, P.O. Box 96456, Washington,

D.C. 20090-6456; telephone: (202) 720-2491; Fax: (202) 205-6632. Small

businesses may request information on compliance with this regulation

by contacting: Jay Guerber, Marketing Order Administration Branch,

Fruit and Vegetable Programs, AMS, USDA, P.O. Box 96456, room 2523-S,

Washington, DC 20090-6456; telephone (202) 720-2491; Fax (202) 205-

6632.

SUPPLEMENTARY INFORMATION: This proposed 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 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 1998-99 marketing year, which begins

on June 1, 1998. 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 1998-99 marketing year at its October

8, 1997, meeting. With 6 members favoring the recommendation and 1

member opposed, the Committee recommended the establishment of a

salable quantity and allotment percentage for Class 1 (Scotch)

spearmint oil of 1,187,077 pounds and 65 percent, respectively. The

member in opposition 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 Class 3 (Native) spearmint oil of 1,155,217 pounds and

57 percent, respectively.

This proposed rule would limit the amount of spearmint oil that

handlers may purchase from, or handle for, producers during the 1998-99

marketing year, which begins on June 1, 1998. 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 marketing order). Spearmint oil is also produced in the Midwest.

The production area covered by the marketing order accounts for

approximately 65 percent of the annual U.S. production of Scotch

spearmint oil and approximately 90 percent of the annual U.S.

production of Native 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 41 percent of the world total. Therefore, the

Committee's recommendation for Scotch spearmint oil could maintain

market stability by avoiding extreme fluctuations in supplies and

prices, and would help the industry remain competitive on an

international level by hopefully regaining some of the Far West's

historical share of the global market. The Committee's recommendation

is intended to foster market stability so that the Far West's Scotch

spearmint oil market share will not only be retained, but expanded as

well.

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

[[Page 67298]]

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 the U.S. production 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.

The proposed salable quantity and allotment percentage for each

class of spearmint oil for the 1998-99 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 l, 1998--456,994 pounds. This

figure is derived by subtracting the estimated 1997-98 marketing

year trade demand of 853,987 pounds from the revised 1997-98

marketing year total available supply of 1,310,981 pounds.

(B) Estimated world production for the 1997-98 marketing year--

2,186,128 pounds.

(C) Estimated Far West production for the 1997-98 marketing

year--892,628 pounds.

(D) Far West percentage of total world production in 1997-98--41

percent. This is down from the 1980 level of approximately 80

percent.

(E) Total estimated allotment base for the 1998-99 marketing

year--1,826,272 pounds. This figure represents a one percent

increase over the revised 1997-98 allotment base.

(F) Recommended 1998-99 allotment percentage--65 percent. This

figure is based upon recommendations made at the October 8, 1997,

meeting, as well as at the five production area meetings held during

September.

(G) The Committee's computed 1998-99 salable quantity--1,187,077

pounds. This figure is the product of the recommended allotment

percentage and the total estimated allotment base.

(H) Estimated available supply for the 1998-99 marketing year--

1,644,071 pounds. This figure is derived by adding the computed

salable quantity to the June 1, 1998, carry-in volume, and

represents the total amount of Scotch spearmint oil that could be

available to the market during the 1998-99 marketing year.

(I) Estimated trade demand for Far West Scotch spearmint oil

during the 1998-99 marketing year--900,000 pounds. This figure is

based upon estimates provided to the Committee by buyers of

spearmint oil.

(J) Estimated carry-out on June 1, 1999--744,071 pounds. This

figure is the difference between the 1998-99 estimated trade demand

and the 1998-99 estimated available supply.

(2) Class 3 (Native) Spearmint Oil

(A) Estimated carry-in on June 1, 1998--34,756 pounds. This

figure is the difference between the estimated 1997-98 marketing

year trade demand of 1,150,000 pounds and the revised 1997-98

marketing year total available supply of 1,184,756 pounds.

(B) Estimated trade demand (domestic and export) for the 1998-99

marketing year--1,178,401 pounds. This figure is based on the

average of the three most recent years' sales figures and input from

spearmint oil buyers.

(C) Salable quantity required from 1998 production--1,143,645

pounds. This figure is the difference between the estimated 1998-99

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

1998.

(D) Total estimated allotment base for the 1998-99 marketing

year--2,026,696 pounds. This figure represents a one percent

increase over the revised 1997-98 allotment base.

(E) Computed allotment percentage--56.4 percent. This percentage

is computed by dividing the required salable quantity by the total

estimated allotment base.

(F) Recommended allotment percentage--57 percent. This is the

Committee's recommendation based on the computed allotment

percentage.

(G) The Committee's recommended salable quantity--1,155,217

pounds. This figure is the product of the recommended allotment

percentage and the total estimated allotment base.

The salable quantity is the total quantity of each class of

spearmint 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 1,187,077 pounds and allotment percentage of 65 percent are based on

the Committee's goal of maintaining market stability by avoiding

extreme fluctuations in supplies and prices, and thereby helping the

industry remain competitive on the international level. The Committee's

recommended Native spearmint oil salable quantity of 1,155,217 pounds

and allotment percentage of 57 percent are based on anticipated supply

and trade demand during the 1998-99 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 more than their annual

allotments during the 1998-99 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 1998-

99 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 section 985.50

of the order. During its discussion of potential 1998-99 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 would allow for anticipated market needs. In determining

anticipated market needs, consideration by the Committee was given to

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

rule also provides producers with information on the amount of

spearmint 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 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

[[Page 67299]]

small entities acting on their own behalf. Thus, both statutes have

small entity orientation and compatibility.

There are 9 spearmint oil handlers subject to regulation under the

order, and approximately 124 producers of Class 1 (Scotch) spearmint

oil and approximately 110 producers of Class 3 (Native) spearmint oil

in the regulated production area. 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 two of the nine handlers regulated by the order would be

considered small entities. Most of the handlers are large corporations

involved in the international trading of essential oils and the

products of essential oils. In addition, the Committee estimates that

29 of the 124 Scotch spearmint oil producers and 14 of the 110 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. To remain economically viable with

the added costs associated with spearmint production, most spearmint

oil producing farms would fall into the SBA category of large

businesses in order to remain economically viable due to added costs

associated with the production of spearmint oil.

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 1998-99 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.

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.

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 1998-99 marketing year, and recommending

either higher or lower levels for the salable quantities and allotment

percentages. The Committee reached its recommendation to establish

salable quantities and allotment percentages for both classes of

spearmint oil after careful consideration of all 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 1.2 million 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 goals of market and price stability, with 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 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

proposed rule.

Finally, the Committee's meeting was 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 the

opportunity to respond to the proposal, including any regulatory and

informational impacts of this action on small businesses. Thirty days

is deemed appropriate because this rule would need to be in place as

soon as possible to provide producers sufficient time prior to the

beginning of the 1998-99 marketing year to adjust their cultural and

marketing plans accordingly. 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.

[[Page 67300]]

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. 985.217 is added to read as follows:

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

Regulations.

Sec. 985.217 Salable quantities and allotment percentages--1998-99

marketing year.

The salable quantity and allotment percentage for each class of

spearmint oil during the marketing year beginning on June 1, 1998,

shall be as follows:

(a) Class 1 (Scotch) oil--a salable quantity of 1,187,077 pounds

and an allotment percentage of 65 percent.

(b) Class 3 (Native) oil--a salable quantity of 1,155,217 pounds

and an allotment percentage of 57 percent.

Dated: December 18, 1997.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 97-33592 Filed 12-23-97; 8:45 am]

BILLING CODE 3410-02-P