Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Revision of the Salable Quantity and Allotment Percentage for Class 3 (Native) Spearmint Oil for the 1997-98 Marketing Year

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[FV98-985-2 IFR]

Marketing Order Regulating the Handling of Spearmint Oil Produced

in the Far West; Revision of the Salable Quantity and Allotment

Percentage for Class 3 (Native) Spearmint Oil for the 1997-98 Marketing

Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule increases the quantity of Class 3 (Native) spearmint

oil produced in the Far West that handlers may purchase from, or handle

for, producers during the 1997-98 marketing year. This rule was

recommended by the Spearmint Oil Administrative Committee (Committee),

the agency responsible for local administration of the marketing order

for spearmint oil produced in the Far West. The Committee recommended

this rule to avoid extreme fluctuations in supplies and prices and thus

help to maintain stability in the Far West spearmint oil market.

DATES: Effective on April 30, 1998, through May 31, 1998; comments

received by May 19, 1998, will be considered prior to issuance of a

final rule.

ADDRESSES: Interested persons are invited to submit written comments

concerning this rule. Comments must be sent to the Docket Clerk, Fruit

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

96456, Washington, DC 20090-6456; Fax: (202) 205-6632. 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: 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 97204-2807; telephone: (503) 326-2724; Fax: (503) 326-

7440; or Anne M. Dec, Marketing Order Administration Branch, Fruit and

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

96456, Washington, DC 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, room

2525, South Building, P.O. Box 96456, Washington, DC 20090-6456;

telephone (202) 720-2491; Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This 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), 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 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 rule

increases the quantity of Native spearmint oil produced in the Far West

that may be purchased from or handled for producers by handlers during

the 1997-98 marketing year, which ends on May 31, 1998. This 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.

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. The U.S. production of spearmint oil

is concentrated in the Far West, primarily Washington, Idaho, and

Oregon (part of the area covered by the order). Spearmint oil is also

produced in the Midwest. The production area covered by the order

normally accounts for approximately 75 percent of the annual U.S.

production of spearmint oil.

This rule increases the quantity of Native spearmint oil that

handlers may purchase from, or handle for, producers during the 1997-98

marketing year, which ends on May 31, 1998. This rule increases the

salable quantity from 1,125,351 pounds to 1,185,550 pounds and the

allotment percentage from 56 percent to 59 percent for Native spearmint

oil for the 1997-98 marketing year.

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

that handlers may purchase from, or handle for, producers during a

marketing year. The salable quantity calculated by the Committee is

based on the estimated trade demand. The total salable quantity is

divided by the total industry allotment base to determine an allotment

percentage. Each producer is allotted a share of the salable quantity

by applying the allotment percentage to the producer's individual

allotment base for the applicable class of spearmint oil.

[[Page 23372]]

The initial salable quantity and allotment percentages for Scotch

and Native spearmint oils for the 1997-98 marketing year were

recommended by the Committee at its October 2, 1996, meeting. The

Committee recommended salable quantities of 996,522 pounds and

1,125,351 pounds, and allotment percentages of 55 percent and 56

percent, respectively, for Scotch and Native spearmint oils. A proposed

rule was published in the January 7, 1997, issue of the Federal

Register (62 FR 942). A final rule establishing the salable quantities

and allotment percentages for Scotch and Native spearmint oils for the

1997-98 marketing year was published in the July 9, 1997, issue of the

Federal Register (62 FR 36646).

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

of the order, at its February 25, 1998, meeting, the Committee

unanimously recommended that the allotment percentage for Native

spearmint oil for the 1997-98 marketing year be increased by 3 percent

from 56 percent to 59 percent. Taking into consideration the following

discussion on adjustments to the Native spearmint oil salable quantity,

the 1997-98 marketing year salable quantity of 1,125,351 pounds will

therefore be increased to 1,185,550 pounds.

The original total industry allotment base for Native spearmint oil

for the 1997-98 marketing year was established at 2,009,556 pounds and

was revised during the year to 2,006,630 pounds to reflect loss of

2,926 pounds of base due to non-production of some producers' total

annual allotments. When the revised total allotment base of 2,006,630

pounds is applied to the originally established allotment percentage of

56, the 1997-98 marketing year salable quantity of 1,125,351 pounds is

effectively modified to 1,123,713 pounds.

Further, Sec. 985.56(a) of the order authorizes producers who have

produced more than their salable quantity of spearmint oil during a

marketing year to transfer such excess to producers who have produced

less than their salable quantity for the same marketing year. If all

producers having such an excess transfer their excess oil to producers

having a deficiency, all of the annual allotment is utilized. If, on

the other hand, this option is not utilized to its full extent, some

annual allotment is essentially lost and the effective salable quantity

for that year is reduced by the amount of excess oil that was not

transferred to fill deficiencies. During the 1997-98 marketing year,

producers who were deficient by 3,957 pounds of Native spearmint oil

chose not to have this deficiency filled by producers having excess

oil. This also effectively reduced the already modified 1997-98 salable

quantity by 3,957 pounds leaving a net quantity of 1,119,756 pounds.

By increasing the salable quantity and allotment percentage, this

rule makes an additional amount of Native spearmint oil available by

releasing such oil from the reserve pool. When applied to each

individual producer, the 3 percent allotment percentage increase allows

each producer to take up to 3 percent of their allotment base from

their Native spearmint oil reserve. If a producer does not have any

reserve pool oil, or has less than 3 percent of their allotment base in

the reserve pool, the increase in allotment percentage will actually

make less than such amount available to the market. Currently,

producers receiving 6,201 pounds of additional allotment through this

increase do not have any Native spearmint oil in reserve. Thus, rather

than 60,199 additional pounds, this action effectively makes an

additional 53,998 pounds of Native spearmint oil available to the

market.

The following table summarizes the Committee recommendation:

Native Spearmint Oil Recommendation

(a) Estimated 1997-98 Allotment Base--2,009,556 pounds. This is the

estimate that the 1997-98 Native spearmint oil salable quantity and

allotment percentage was based on.

(b) Revised 1997-98 Allotment Base--2,006,630 pounds. This is 2,926

pounds less than the estimated allotment base. This base was lost

because some producers failed to produce all of their previous year's

allotment.

(c) Initial 1997-98 Allotment Percentage--56 percent.

(d) Initial 1997-98 Salable Quantity--1,125,351 pounds. This figure

is 56 percent of 2,009,556 pounds.

(e) Initial Adjustment to the 1997-98 Salable Quantity--1,123,713

pounds. This figure reflects the salable quantity initially available

after the beginning of the 1997-98 marketing year due to the 2,296

pound reduction in the industry allotment base to 2,006,630 pounds.

(f) Final Adjustment to the 1997-98 Salable Quantity--1,119,756

pounds. This figure reflects the salable quantity actually available

during the 1997-98 marketing year after the 3,957 pound deficiency was

subtracted from the initially adjusted salable quantity of 1,123,713

pounds.

(g) Increase in Allotment Percentage--3 percent. This percentage

increase was recommended by the Committee at its February 25, 1998,

meeting.

(h) Revised 1997-98 Allotment Percentage--59 percent. This figure

is derived by adding the 3 percent increase to the initial 1997-98

allotment percentage of 56 percent.

(i) Calculated Revised 1997-98 Salable Quantity--1,185,638 pounds.

This figure is 59 percent of the estimated 1997-98 allotment base of

2,009,556 pounds.

(j) Computed Increase in the 1997-98 Salable Quantity--60,287

pounds. This is the product of the estimated 1997-98 allotment base of

2,009,556 and the revised 1997-98 allotment percentage of 59 percent.

(k) Effective Increase in the 1997-98 Salable Quantity--53,998

pounds. This figure represents the amount of Native spearmint oil

actually being made available by this action based on the adjustments

described herein.

In making this latest recommendation, the Committee considered all

available information on supply and demand. The 1997-98 marketing year

began on June 1, 1997. Handlers have indicated that with this action,

the available supply of both Scotch and Native spearmint oils appears

adequate to meet anticipated demand through May 31, 1998. Without the

increase, the Committee believes the industry would not be able to meet

market needs. As of February 25, 1998, approximately 89,000 pounds of

Native spearmint oil was available for market. Average demand for

Native spearmint oil from March 1 to May 31 over the past 17 years has

been 108,029 pounds. Therefore, based on past history the industry may

not be able to meet market demand without this increase. When the

Committee made its initial recommendation for the establishment of the

Native spearmint oil salable quantity and allotment percentage for the

1997-98 marketing year, it had anticipated that the year would end with

an ample available supply. This action has the effect of adding 53,998

pounds of Native spearmint oil to the amount available for market,

bringing the total available supply for the period February 25 through

May 31, 1998, up to approximately 144,000 pounds.

The Department, based on its analysis of available information, has

determined that the 1997-98 salable quantity and allotment percentage

for Native spearmint oil for the 1997-98 marketing year should be

increased to 1,185,638 and 59 percent, respectively.

This rule relaxes the regulation of Native spearmint oil and will

allow growers to meet market needs and improved returns. In conjunction

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

policy statement for the 1997-98 marketing

[[Page 23373]]

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

policy statement, a requirement whenever the Committee recommends

implementing volume regulations or recommends revisions to existing

volume regulations, fully meets the intent of section 985.50 of the

order. During its discussion of revising the 1997-98 salable quantities

and allotment percentages, the Committee considered: (1) The estimated

quantity of salable oil of each class held by producers and handlers;

(2) the estimated demand for each class of oil; (3) prospective

production of each class of oil; (4) total of allotment bases of each

class of oil for the current marketing year and the estimated total of

allotment bases of each class for the ensuing marketing year; (5) the

quantity of reserve oil, by class, in storage; (6) producer prices of

oil, including prices for each class of oil; and (7) general market

conditions for each class of oil, including whether the estimated

season average price to producers is likely to exceed parity.

Conformity with the Department's ``Guidelines for Fruit, Vegetable, and

Specialty Crop Marketing Orders'' has also been reviewed and confirmed.

The increase in the Native spearmint oil salable quantity and

allotment percentage allows for anticipated market needs for this class

of oil. In determining anticipated market needs, consideration by the

Committee was given to historical sales, and changes and trends in

production and demand.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the 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 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

marketing order and approximately 200 producers of spearmint oil in the

regulated production area. Of the 200 producers, approximately 125

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

approximately 110 producers hold Class 3 (Native) spearmint oil

allotment base. Small agricultural service firms are defined by the

Small Business Administration (SBA) (13 CFR 121.601) as those having

annual receipts of less than $5,000,000, and small agricultural

producers have been defined as those whose annual receipts are less

than $500,000.

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

estimates that 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 oil production, most

spearmint oil producing farms would fall into the category of large

businesses.

Small spearmint oil producers represent a minority of farming

operations and are more vulnerable to market fluctuations. Such small

farmers generally need to market their entire annual crop and do not

have the resources 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 of stronger

incomes from alternate crops which could support the operation for a

period of time. Despite the advantage of larger producers, increasing

the Native salable quantity and allotment percentage will help both

large and small producers by improving returns. In addition, this

change may potentially benefit the small producer more than large

producers. This is because the change ensures that small producers are

more likely to maintain a profitable cash flow and meet annual

expenses.

Alternatives to this rule included not increasing the available

supply of Native spearmint oil, which could potentially hurt small

producers. The Committee reached its recommendation to increase the

salable quantity and allotment percentage for Native spearmint oil

after careful consideration of all available information, and believes

that the level recommended will achieve the objectives sought. Without

the increase, the Committee believes the industry would not be able to

meet market needs. As of February 25, 1998, approximately 88,000 pounds

of Native spearmint oil were available for market. Average demand for

Native spearmint oil from March 1 to May 31 over the past 17 years has

been 108,029 pounds. Therefore, based on past history the industry may

not be able to meet market demand without this change. When the

Committee made its initial recommendation for the establishment of the

Native spearmint oil salable quantity and allotment percentage for the

1997-98 marketing year, it had anticipated that the year would end with

an ample available supply. This revision has the effect of adding

53,998 pounds of Native spearmint oil to the amount available for

market, bringing the total available supply for the period February 25

through May 31, 1998, up to 144,158 pounds.

Annual salable quantities and allotment percentages have been

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

Reporting and recordkeeping requirements have remained the same for

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

additional reporting or recordkeeping requirements on either small or

large spearmint oil producers and handlers. All reports and forms

associated with this program are reviewed periodically in order to

avoid unnecessary and duplicative information collection by industry

and public sector agencies. The Department has not identified any

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

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.

After consideration of all relevant matter presented, including

that

[[Page 23374]]

contained in the prior proposed and final rules in connection with the

establishment of the salable quantities and allotment percentages for

Scotch and Native spearmint oils for the 1997-98 marketing year, the

Committee's recommendation and other available information, it is found

that to revise section 985.216 (62 FR 36650) to change the salable

quantity and allotment percentage for Native spearmint oil, as

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

the Act.

This rule invites comments on a revision to the salable quantity

and allotment percentage for Native spearmint oil. A 20-day comment

period is provided. This comment period is appropriate because the

marketing year ends on May 31, 1998. Any comments received will be

considered prior to finalization of this rule.

Pursuant to 5 U.S.C. 553, it is also found and determined upon good

cause that it is impracticable, unnecessary, and contrary to the public

interest to give preliminary notice prior to putting this rule into

effect and that good cause exists for not postponing the effective date

of this rule until 30 days after publication in the Federal Register

because: (1) This rule increases the quantity of Native spearmint oil

that may be marketed during the marketing year which ends on May 31,

1998; (2) the quantity of Native spearmint planted for the 1998-99

marketing year may be affected, thus handlers and producers should be

apprised as soon as possible of the salable quantity and allotment

percentage of Native spearmint oil contained in this interim final

rule; (3) the Committee unanimously recommended this change at a public

meeting and interested parties had an opportunity to provide input; and

(4) this rule provides a 20-day comment period and any comments

received will be considered prior to finalization of this rule.

List of Subjects in 7 CFR Part 985

Marketing agreements, Oils and fats, Reporting and recordkeeping

requirements, Spearmint oil.

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

amended as follows:

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

PRODUCED IN THE FAR WEST

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

follows:

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

2. Section 985.216 is amended by revising paragraph (b) to read as

follows:

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

Federal Regulations.]

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

marketing year.

* * * * *

(b) Class 3 (Native) oil--a salable quantity of 1,185,550 pounds

and an allotment percentage of 59 percent.

Dated: April 24, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-11446 Filed 4-28-98; 8:45 am]

BILLING CODE 3410-02-P