Peanuts Marketed in the United States; Relaxation of Handling Regulations

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 997 and 998

[Docket Nos. FV97-997-1 FIR and FV97-998-1 FIR]

Peanuts Marketed in the United States; Relaxation of Handling

Regulations

AGENCY: Agricultural Marketing Service (AMS), USDA.

ACTION: Final rule.

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

SUMMARY: The Department of Agriculture (Department) is adopting, as a

final rule, with modifications, the provisions of an interim final rule

(IFR) that relaxed for 1997 and subsequent crop peanuts, several

provisions regulating the handling of domestically produced peanuts

marketed in the United States. This finalization continues the IFR's

improved efficiency and reduced program costs resulting in a similar

reduction in assessments charged Agreement signer and non-signer

handlers.

EFFECTIVE DATE: June 19, 1998.

FOR FURTHER INFORMATION CONTACT: George J. Kelhart or Jim Wendland,

Marketing Order Administration Branch, Fruit and Vegetable Programs,

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

20090-6456; telephone: (202) 720-2491, Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing

Agreement No. 146 (Agreement)(7 CFR part 998) and the Agricultural

Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674),

hereinafter referred to as the ``Act.'' The Agreement and the

regulations issued thereunder and the non-signatory peanut handler

regulations (7 CFR part 997) regulate the quality of domestically

produced peanuts.

The Department is issuing this final rule in conformance with

Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

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

This rule will not preempt any State or local laws, regulations, or

policies, unless they present an irreconcilable conflict with this

rule. There are no administrative procedures which must be exhausted

prior to any judicial challenge to the provisions of this rule.

Following explanation of each change to the Agreement's regulation,

the corresponding change to the non-signatory handlers' regulation is

discussed.

Incoming Regulations

Farmers Stock Storage and Handling Facilities

The Peanut Administrative Committee (Committee) recommended

amending Sec. 998.100 Incoming quality regulation for 1996 and

subsequent crop peanuts by removing paragraph (g) Farmers Stock Storage

and Handling Facilities which previously regulated the condition of

such facilities and authorized Committee inspection. The Committee

recommended the change to save approximately $450,000, by eliminating

the positions of the seven fieldmen whose specified duties through the

1996 crop year included spending an estimated 60-65 percent of their

time inspecting and approving such facilities. The vote was 17 ``For''

and 1 ``Against'', with the dissenting voter contending that the

fieldmen were providing valuable services, their positions should not

be eliminated, and that inspection and approval of such facilities by

the Committee staff were important. Handlers contended they were

already paying their own employees to do facilities inspections and the

cost of such duplication of effort needed to be eliminated and the

Department issued the change. Also, this cost-cutting has not adversely

[[Page 33238]]

affected quality since peanuts must still meet the Outgoing Quality

Regulation.

Elimination of the regulatory provision has allowed the Committee

to reduce its non-headquarters staff from seven to one compliance

officer in each of the three production areas and reduce the current

``fieldmen'' staffing costs to zero. The compliance officers are

conducting compliance audits of Agreement signers similar to AMS

approved non-signer program compliance plan procedures, where AMS

Compliance Staff auditors check non-signers' records. A revised 1997-98

compliance plan from the Committee includes these new procedures. AMS

believes this will continue to assure compliance under the Agreement.

The non-signer regulation contains no similar requirements for

inspection and approval of such facilities, so no change is needed to

it.

Outgoing Regulations

The Committee unanimously recommended that Sec. 998.200(a) be

amended to provide that minimum grade requirements for lots of

``splits'' (the separated halves of peanut kernels) be modified to

correspond with ``United States Standards For Grades Of: (1) Cleaned

Virginia Type Peanuts In The Shell; or (2) Shelled Runner Type Peanuts;

or (3) Shelled Spanish Type Peanuts; or (4) Shelled Virginia Type

Peanuts'' (7 CFR part 51: Sections 51.1235-1242; 51.2710-2721; 51.2730-

2741; and 51.2750-2763, respectively). The increase to 2.00 percent

from the prior 1.50 percent for unshelled peanuts and damaged kernels

was needed to provide consistency with the grade standards. Under the

former regulation, a handler could have had a lot of peanuts which met

U.S. Grade Standards for U.S. Splits, but failed to meet Agreement

requirements for edible quality. It was initially expected that this

change might reduce the number of lots needing remilling to meet

outgoing quality requirements by less than 10 percent if it was an

average year. But the 1997 crop has been stressed by drought conditions

and the industry in virtually all peanut producing States has expressed

having some problems with quality. Thus, this change is now expected to

reduce handlers' need to remill by more than 10 percent during the 1997

crop year, saving an estimated $30 on each ton not needing to be

remilled.

The only comment received concerning the IFR, filed by the

Committee, dealt with Sec. 998.200(a). The Committee urged that

portions of Table 2 INDEMNIFIABLE GRADES, which had been removed by the

IFR, be restored by adding them to the MAXIMUM LIMITATIONS table. The

IFR modification inadvertently eliminated all nine of the INDEMNIFIABLE

GRADE categories. The Committee said its intent was to cause all edible

grade categories of peanuts to be eligible for indemnification, not to

eliminate any grade categories. Three of the grade categories--Runner

with splits, Virginia with splits, and Spanish and Valencia with

splits--are not included in the U.S. grade standards for peanuts.

``Runner with splits'' exists under the American Peanut Shellers

Association's specifications but not the other categories. Therefore,

the three not included in the grade standards need to be restored, for

convenient use by the peanut industry, since such peanuts still have a

domestic market niche. Federal Government Commodity Procurement

Program, Farm Service Agency's Commodity Operations Division and many

commercial firms had used these grade categories in contract

specifications to purchase such peanuts. Also, to be consistent with

the other maximum tolerances in the ``Unshelled peanuts and damaged

kernels'' column and the ``Unshelled peanuts and damaged kernels and

minor defects'' column, the percentage tolerances for the three

restored categories need to be relaxed to 1.50 percent from 1.25 and to

2.50 percent from 2.00, respectively. Therefore, the three ``* * * with

splits'' type and grade categories and their relaxed tolerances need to

be incorporated into the MAXIMUM LIMITATION table in Sec. 998.200(a)

and Sec. 997.30(a). This simplifies grade requirements by having only

one set of quality requirements for human consumption use. The

Department agrees with the comment and includes the changes in this

finalization of the IFR. This relaxation in tolerances will reduce the

number of lots that need to be reconditioned to meet outgoing quality

requirements. This will save signer handlers reconditioning and storage

costs.

Similar changes are made to the corresponding Sec. 997.30(a) of the

non-signer regulation, with proportional savings on such handlers' much

smaller volume.

The Committee unanimously recommended that Sec. 998.200(h)(1) be

amended to allow lots of peanuts which fail edible quality

requirements, due to excessive fall through, to be custom blanched.

However, such lots will have to be certified as meeting minimum ``fall

through'' requirements after blanching. This finalization continues the

elimination of the former requirement that prior to movement of such

peanuts, handlers had to submit a form to the Committee and receive

authorization for movement and blanching of each such lot.

Section 997.40(d) of the non-signer regulation currently does not

require such handlers to submit a request to the Department and receive

authorization for movement and blanching of each such lot. Therefore,

no similar change to that provision is needed. However, this

finalization continues the IFR's amendment which added ``fall through''

to the category of items allowed in the first and third sentences.

The Committee also unanimously recommended a further change to

paragraph (h), specifically that subparagraphs (h)(1) and (h)(2) be

further amended to provide that reject peanuts may be placed in

suitable containers acceptable to the Committee. The current

requirement specifies ``bagged'', which refers to the older standard-

sized burlap bags, which hold approximately 110 pounds. It does not

include the many newer and more efficient containers which are easier

to handle such as tote bags, corrugated containers (including those

with capacities of over a ton), Super Sacks, and other various company

containers used by individual peanut product manufacturers. This

finalization will continue the IFR's change which allowed handlers to

use more efficient containers or those desired by their customers. For

purposes of this provision, most any container that handlers use will

be considered suitable.

Section 997.40(c) of the non-signer regulation previously provided

for ``in bulk or bags or other suitable containers.'' This finalization

continues the IFR's change to make it consistent with the Agreement's

amended regulation, by removing the words ``in bulk or.'' The same

applies to paragraphs (d) and (e) which were amended by removing the

word ``bagged'' and replacing it with the words ``placed in suitable

containers.''

The Committee also unanimously recommended that Sec. 998.200

Outgoing quality regulation and Sec. 998.300 Terms and conditions of

indemnification * * * be amended to make all lots of edible quality

peanuts indemnifiable, for freight reimbursement, when rejected on

appeal after being certified ``negative'' as to aflatoxin. This

finalization continues the IFR's changes to provisions specified in

Sec. 998.300, making product claim lots of edible quality peanuts also

indemnifiable. This involves lots where a handler sustained a loss as a

result of a buyer withholding

[[Page 33239]]

from human consumption any or all of the product made from a lot of

peanuts which had been determined to be unwholesome due to aflatoxin

after such lot had originally been certified ``negative'' as to

aflatoxin. This change provided consistency by treating all edible

quality peanuts equally, whether appeal claims or product claims.

Although these changes have further reduced costs and promoted

uniformity in the handling of indemnification of all edible quality

peanuts, there is no way to accurately quantify how much these

reductions have been, because the savings are different for each

handler. However, the total savings are expected to be a minor fraction

of the projected approximately $350,000 total 1997 crop indemnification

costs.

The non-signer enabling legislation does not provide authority for

indemnification. Therefore, no similar change was needed in the non-

signer regulation.

The Committee further unanimously recommended that

Sec. 998.200(h)(3) be amended to provide that peanuts which have been

certified as meeting minimum grade requirements specified in

Sec. 998.200(a)(1), but fail to meet requirements for aflatoxin, may be

roasted while being blanched prior to being certified as meeting the

aflatoxin requirements. After roasting, such peanuts must be sampled

and assayed for aflatoxin content but do not have to be re-sampled and

analyzed for grade again. This simplified process was recommended by

the Committee and issued in the IFR by the Department. Prior to the

IFR, such blanched peanuts, after certification, were often returned to

the blancher for additional heating. This finalization continues the

IFR's favorable effects of not having to remove the blanched peanuts

short of the complete roasting process for sampling and aflatoxin

analysis, and then running them back through the blancher again. This

added costs to the roasting process and usually caused additional,

unintentional damage due to the extra handling of the kernels. Also,

the roasting enhances the blanching efforts to eliminate aflatoxin,

thus improving the wholesomeness, quality and value of such shelled

peanuts. The savings involved in blanching and roasting in one step may

often outweigh the approximately $40 per hour costs of having an

inspector present during this process to maintain needed positive lot

identification. Any residual peanuts, excluding skins and hearts,

resulting from this roasting process, must be red tagged and disposed

of to inedible peanut outlets. The same factors apply to Sec. 997.40(d)

of the non-signer regulation.

This finalization continues the IFR's provision that unchanged

portions of the incoming and outgoing regulations that were in effect

for 1996 and subsequent crop peanuts will remain in effect for 1997 and

subsequent crop peanuts.

An interim final rule concerning this action was published in the

Federal Register on January 16, 1998 (63 FR 2846). A 60-day comment

period, which ended on March 17, 1998, was provided to allow interested

persons to respond to the interim final rule. One comment was received

during the comment period. That comment was discussed earlier in this

document, as a part of the discussion of changes in the regulations.

The Regulatory Flexibility Act and Effects on Small Businesses

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 final 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 the small businesses

will not be unduly or disproportionately burdened. Marketing agreements

and orders issued pursuant to the Act, and the 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 27 signatory and 30 non-signatory peanut

handlers who are currently subject to regulations under the Agreement

and non-signer program respectively and approximately 25,000 commercial

peanut producers in the 16-State production area. Small agricultural

service firms, which include handlers, have been 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 are

defined as those having annual receipts of less than $500,000.

Approximately 25 percent of the signatory handlers, virtually all of

the non-signers, and most of the producers may be classified as small

entities. This action will be favorable to the industry by tending to

improve efficiency, reduce costs, and increase returns.

This finalization will continue the IFR's relaxations to handling

regulations by simplifying requirements; thus, enabling handlers, both

large and small, to cut costs and more efficiently handle their peanut

supplies, without jeopardizing safeguard requirements in the current

regulations.

The relaxations included:

1. The elimination of the requirement for inspection and approval

of farmers stock storage and handling facilities has saved

approximately $450,000 by eliminating the positions of the seven

fieldmen, who had performed this activity through last crop year.

Handlers contended they were already paying their own employees to do

this and that the duplicate cost should be eliminated;

2. Relaxing the minimum grade requirements for ``splits'' to

correspond with U.S. grade standards will likely reduce the number of

lots which need to be remilled during the 1997 crop by 10 percent, due

to stressed growing conditions in virtually all areas. This should

result in significant reductions in handlers' costs;

3. Another IFR relaxation provided that all lots of edible quality

peanuts, whether appeal claims or product claims, are eligible for

Agreement signer handlers' indemnification benefits. Thus, such

handlers with product claim lots are also eligible for reimbursement of

most transportation expenses on such lots. Such additional

reimbursement was not publicly quantified by the Committee, but is a

minor portion of its projected $350,000 total 1997 crop indemnification

costs;

4. The IFR's relaxed provision to allow lots which fail edible

quality requirements, due to excessive fall through, to be custom

blanched eliminates the previous requirement that handlers had to

submit a form to the Committee and receive authorization for movement

and blanching of each such lot. This relaxation has eliminated

unnecessary paperwork and saved time for all affected handlers;

5. Relaxing the previous requirement that peanuts be ``bagged''

(i.e., placed only in older standard-size burlap bags holding

approximately 110 pounds) by allowing the use of suitable containers,

which permits use of the many newer and more efficient containers or

those desired by handlers' customers; and

6. Another relaxation allowed peanuts which had been certified as

meeting the minimum grade requirements, but failed to meet requirements

for aflatoxin, to be roasted while being blanched prior to being

certified as meeting the aflatoxin requirements. This simplified

process eliminated running such peanuts back through the blancher again

for roasting, which doubled the processing costs and tended to lower

the peanuts' quality and value by causing additional damage to

[[Page 33240]]

them. Such savings may outweigh the approximately $40 per hour expense

of having an inspector present to maintain needed positive lot

identification.

The IFR's relaxed requirements have significantly improved

efficiency and enabled the Committee to cut in half its 1997 crop year

administrative budget and assessment rate charged Agreement signer and

non-signer handlers to finance their respective programs. The rate of

assessment for the 1996 crop year was $0.70 per net ton of assessable

peanuts. The rate for the 1997 crop year was reduced to $0.35 per net

ton by an earlier rulemaking action, as published in the September 17,

1997, issue of the Federal Register (62 FR 48749). This lower rate

saved regulated domestic handlers approximately $500,000 in

administrative assessment costs which, to a great extent, was made

possible by the IFR's relaxation actions.

The finalization continues the IFR's specifics of each change and

why they tended to increase returns to handlers, which were covered in

detail near the beginning of this rule under the discussion starting

with ``Incoming regulations.'' These IFR changes relaxed requirements

on regulated domestic peanut handlers, improved their efficiency and

cut costs, and benefitted the peanut industry, manufacturers, and

consumers, while still assuring the quality of all peanuts in domestic

human consumption markets.

As with all Federal marketing agreement and order programs, reports

and forms are periodically reviewed to reduce information requirements

and duplication by industry and public sectors. Consistent with the

Paperwork Reduction Act (44 U.S.C. Chapter 35), the Committee

unanimously recommended greatly reducing reporting and recordkeeping

requirements on both large and small peanut handlers regulated under

the Agreement. It has eliminated 20 of the 21 Committee forms

previously approved by the Office of Management and Budget (OMB) that

might accompany peanut shipments, to only require the use of the Form

PAC-1. The PAC-1 is mailed to handlers on a monthly basis and is used

to report receipts and acquisitions of farmers stock peanuts and to

remit assessments. It is estimated that this has eliminated 95 percent

(or about 2,291 hours and assuming $10 per hour, saving respondents

nearly $23,000 in costs) of the previous estimated 2,417 hours of total

reporting burden on Agreement signers, including small businesses, and

a proportional reduction in non-signers' smaller reporting burdens. A

notice of the proposed revision was published in the July 31, 1997,

issue of the Federal Register (62 FR 41021). Sixty days were allowed

for comments. One comment was received, from the American Peanut

Shellers Association, supporting the reduced burdens. This information

collection package was approved by the OMB under OMB Control No. 0581-

0067.

In addition, the Department has not identified any Federal rules

that duplicate, overlap, or conflict with this finalization.

Further, the Committee's meeting was widely publicized throughout

the peanut industry and all interested persons were invited to attend

the meeting and participate in the Committee's deliberations. Like all

Committee meetings, the April 29-30, 1997, meeting was a public meeting

and all entities, both large and small, were able to express their

views on the issues. The 18-member Committee is composed of an equal

number of peanut handlers and producers, the majority of whom are small

entities.

Also, the Committee has a number of appointed subcommittees to

review certain issues and make recommendations to the Committee. The

Committee's Regulations, Indemnification and Quality Subcommittee and

``New Concept'' Subcommittee met on January 28, 1997, and discussed

these issues in detail. On March 25, 1997, the Committee held an

informational meeting to hear a presentation by the National Peanut

Council's Peanut Industry Revitalization Project Steering Committee and

discuss the issues and then take back to discuss with their industry

peers, before voting on those issues at the April Committee meeting.

The Committee's Administrative Budget Subcommittee also met March 25,

1997, to discuss budget recommendations. All of these meetings were

public meetings and both large and small entities were able to

participate and express their views.

An objective of the two domestic programs is to ensure that only

high quality and wholesome peanuts enter human consumption markets in

the United States. About half of the domestic commercial handlers,

handling approximately 95 percent of the crop volume, have signed the

Agreement. The other half are non-signatory handlers handling the

remaining 5 percent of the domestic production.

Under these regulations, farmers stock peanuts with visible

Aspergillus flavus mold (the principal source of aflatoxin) are

required to be diverted to inedible uses. Each lot of milled peanuts

must be sampled and the samples chemically analyzed for aflatoxin

content. Costs to administer the Agreement and to reimburse the

Department for oversight of the non-signatory program are paid by an

administrative assessment levied on handlers in the respective

programs.

The 18-member Committee, which is composed of an equal number of

peanut producers and handlers, meets at least annually to review the

Agreement's rules and regulations, which are effective on a continuous

basis from one crop year to the next which begins July 1. Committee

meetings are open to the public, and interested persons may express

their views at these meetings. The Department evaluates Committee

recommendations, as well as information from other sources, prior to

making any recommended changes to the regulations under the Agreement.

Section 608b of the Act was amended in 1989 to require that all

peanuts handled by persons who have not entered into the Agreement

(non-signers) be subject to the same quality and inspection

requirements to the same extent and manner as are required under the

Agreement. Section 608b was further amended in 1993 to impose similar

requirements regarding administrative assessments. The non-signatory

handler regulations have been amended several times thereafter and are

published in 7 CFR part 997.

Thus, the Committee's recommended changes to the Agreement signers'

regulations, as finalized in this rule, also are finalized for the non-

signers' regulations. This finalization of an IFR identifies the

corresponding change to the non-signers' regulations for each change to

the Agreement regulations.

According to the Committee, the domestic peanut industry has been

undergoing a period of great change. The Committee bases its view, in

part, on findings in a recent study entitled ``United States Peanut

Industry Revitalization Project'' developed by the National Peanut

Council and the Department's Agricultural Research Service (May 1996).

According to that study, the U.S. peanut industry has been in a

period of dramatic economic decline since 1991 because: (1) Per capita

peanut consumption has steadily declined a total of 11 percent; (2)

harvested acreage has declined 25 percent; (3) production has declined

30 percent and farm value dropped 29 percent; and (4) imports of

peanuts and peanut products have increased from insignificant

quantities to 48,736 raw farmer stock tons in 1995, and to 55,536 in

1996.

That study points to recent increases in the duty-free import quota

for raw peanuts due to the North American

[[Page 33241]]

Trade Agreement (NAFTA) and the Uruguay Round Agreements under the

General Agreement on Tariffs and Trade (GATT). Under Section 22 import

quota provisions, the volume of U.S. peanut imports had been limited to

about 2.3 million pounds, in-shell basis, annually. Thus, imports have

historically represented about one-tenth of 1 percent of U.S. food use

of peanuts. Under NAFTA, Mexico has been granted a minimum access level

for duty-free entry of peanuts of about 10 million pounds, in-shell

basis. This level will increase about 3 percent annually through 2008,

when quantitative limits will cease. Mexico's 1998 duty-free quota will

total 8.4 million pounds. Under GATT, the 1997 quota was 86.8 million

pounds, has increased to 96.8 million pounds (Argentina 81.3 & all

other 15.5) in 1998, and can grow to about 125 million pounds in the

year 2000.

The study also projects that farm production costs and revenue will

be equal by the year 2000, as will handler costs and revenue, leaving

no profit.

In addition, the modification of the Federal farm peanut poundage

quota regulations implemented under the Agricultural Market Transition

Act of 1996 (1996 Act) has resulted in the domestic industry undergoing

significant changes scheduled to continue through the year 2002. The

peanut support price has been reduced from $670 per ton in 1995 to $610

per ton through 2002. The USDA's Farm Service Agency final rule

implementing the Act was published May 9, 1997, (62 FR 25433). That

rule indicates that economic impacts of the 1996 Act include expected

reductions in domestic peanut producers' revenue of $1.25 billion from

1996 through 2002. Quota lease holders could absorb a loss of about $40

million annually because of reduced leasing rates due to the lower

peanut price support. Also, capitalized value of quotas could decline

$200 to $300 million, thus reducing land values and the tax base of

rural communities.

The Committee agrees that all of these factors combined show that

the domestic peanut industry is in decline and that the outlook is not

expected to change without some positive intervention by the industry.

World supply and demand are less important for peanuts than most

U.S. farm commodities. Much of the world peanut production is for non-

food uses, although production for food use might increase a little if

there were no U.S. import restrictions. Also, import quotas, though

increased recently, still are set at relatively low levels.

Domestic peanut production in 1996 was approximately 3.66 billion

pounds, with a farm value of slightly under $1 billion. The Department

reports U.S. peanut production in 1997 totaled 3.54 billion pounds,

down 3 percent from the 1996 crop. Harvested acreage for 1997 was 1.41

million acres, up 2 percent from 1996. USDA estimates that acreage will

increase by 3 percent in 1998. The U.S. yield per harvested acre for

1997 averaged 2,507 pounds, down 146 pounds from 1996. The 1997

marketing year average price received by farmers for peanuts is 26.4

cents per pound, down 1.7 cents from 1996. The value of peanut

production for the 1997 crop is reported as $932 million, down 9

percent from a year earlier.

Production is expected to gradually increase to the year 2002

because domestic food use is projected to rise about 1.5 percent

annually. Imports are expected to remain at a relatively small

percentage of total U.S. peanut use.

Estimated exports of 750 million pounds in Marketing Year (MY) 1997

are below the average for the prior 3 years, but are 11 percent more

than a year earlier. Peanut oil prices are expected to average about 38

cents a pound of oil in MY 1997, 6 percent lower than MY 1996 as

vegetable oil supplies return to more normal levels. Peanut meal prices

for MY 1997 are expected to decline to $175 a ton, down 25 percent from

MY 1996 because of larger soybean meal supplies.

The 28.5 cents per pound season average price of farmer stock

peanuts for MY 1997 was the lowest price of the last two years and

reflects the adjustment to the reduced quota support level and an

unexpected change in the proportions of quota and additionals in 1997

production. Average prices to growers are expected to increase, but

will remain below 1995 prices because of the lower quota price support

level. The value of farm production is expected to gradually rise and

surpass that of 1995 by 2000/01.

The IFR changes of the Agreement's Incoming and Outgoing

regulations for 1997 and subsequent crop peanuts being finalized in

this rule were recommended by the Committee at its April 29-30, 1997,

public meeting.

Alternative Actions Considered

Although the Committee could have recommended no changes or less

changes to the current regulations, it unanimously concluded that those

were not satisfactory solutions. It believes that all possible

simplification and cost-cutting should be done and that these

regulations should focus more on outgoing quality and less on the

shelling and milling processes necessary to meet the outgoing, human

consumption requirements. Newer, high technology milling and blanching

equipment enable handlers to recondition failing peanut lots that could

not have been economically reconditioned when the regulations were

first promulgated. Therefore, it is no longer necessary to impose

restrictions that hinder the efficiency of handling operations and

result in the loss of potentially good quality peanuts. Thus, the

Committee believes this finalization will tend to improve the returns

to growers and handlers, while still maintaining consumer safeguard

provisions in the current domestic regulations, because all peanuts

intended for human consumption must still be inspected and certified

acceptable for such use.

After review of the recommendations and comment of the Committee,

the Department concurs that this finalization of the changes will tend

to improve returns to the industry and be in the public interest.

Expected benefits of the changes were covered in the previous

discussion of each individual change.

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.

Chapter 35) information collection requirements that are contained in

this rule have been previously approved by the OMB and have been

assigned OMB Nos. 0581-0067 (for Agreement signers) and 0581-0163 (for

non-signers).

One comment concerning the IFR was received during the 60-day

comment period. That comment was discussed earlier in this document, as

a part of the discussion of changes in the regulations.

After consideration of all relevant material presented, including

the Committee's recommendations and comment, and other information, it

is found that finalizing the IFR with changes, as hereinafter set

forth, will tend to effectuate the declared policy of the Act.

It is further found that good cause exists for not postponing the

effective date of this rule until 30 days after publication in the

Federal Register (5 U.S.C. 553) because this final rule adopts with

appropriate changes the provisions of the interim final rule; based

upon a comment received, the provisions of the interim final rule have

been modified; this rule relaxes several provisions of the regulations;

and the end of the 1997-98 crop year is June 30, 1998.

[[Page 33242]]

List of Subjects

7 CFR Part 997

Food grades and standards, Peanuts, Reporting and recordkeeping

requirements.

7 CFR Part 998

Marketing agreements, Peanuts, Reporting and recordkeeping

requirements.

Accordingly, the interim final rule amending 7 CFR parts 997 and

998 which was published in the Federal Register at 63 FR 2846 on

January 16, 1998, is adopted as a final rule with the following

changes:

PART 997--PROVISIONS REGULATING THE QUALITY OF DOMESTICALLY

PRODUCED PEANUTS HANDLED BY PERSONS NOT SUBJECT TO THE PEANUT

MARKETING AGREEMENT

1. The authority citation for 7 CFR part 997 continues to read as

follows:

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

2. In Sec. 997.30, in paragraph (a)(1), the ``Maximum Limitations''

table is revised to read as follows:

Sec. 997.30 Outgoing regulation.

* * * * *

Maximum Limitations

[Excluding lots of ``splits'']

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

Unshelled Fall through

Unshelled peanuts, --------------------------------------------------------------------

peanuts damaged Foreign

Type and grade category and kernels and materials Moisture

damaged minor Sound split and Sound whole kernels Total (percent) (percent)

kernels defects broken kernels

(percent) (percent)

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

Runner.......................... 1.50 2.50 3.00%; \17/64\ inch 3.00%; \16/64\ x 4.00% Both screens...... .20 9.00

round screen. \3/4\ inch slot

screen.

Virginia (except No. 2)......... 1.50 2.50 3.00%; \17/64\ inch 3.00%; \15/64\ x 4.00% Both screens...... .20 9.00

round screen. 1 inch slot screen.

Spanish and Valencia............ 1.50 2.50 3.00%; \16/64\ inch 3.00%; \15/64\ x 4.00% Both screens...... .20 9.00

round screen. \3/4\ inch slot

screen.

No. 2 Virginia.................. 1.50 3.00 6.00%; \17/64\ inch 6.00%; \15/64\ x 6.00% Both screens...... .20 9.00

round screen. 1 inch slot screen.

Runner with splits (not more 1.50 2.50 3.00% \17/64\ inch 3.00% \16/64\ x 4.00% Both screens...... .10 9.00

than 15% sound splits). round screen. \3/4\ inch slot

screen.

Virginia with splits (not more 1.50 2.50 3.00% \17/64\ inch 3.00% \15/64\ x 1 4.00% Both screens...... .10 9.00

than 15% sound splits). round screen. inch slot screen.

Spanish & Valencia with splits 1.50 2.50 3.00% \16/64\ inch 2.00% \15/64\ x 4.00% Both screens...... .10 9.00

(not more than 15% sound round screen. \3/4\ inch slot

splits). screen.

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

Lots of ``splits''

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

Runner (not more than 4% sound 2.00 2.50 3.00%; \17/64\ inch 3.00%; \14/64\ x 4.00% Both screens...... .20 9.00

round whole kernels). round screen. \3/4\ inch slot

screen.

Virginia (not less than 90% 2.00 2.50 3.00%; \17/64\ inch 3.00%; \14/64\ x 4.00% Both screens...... .20 9.00

splits). round screen. 1 inch slot screen.

Spanish & Valencia (not more 2.00 2.50 3.00%; \16/64\ inch 3.00%; \13/64\ x 4.00%; Both screens..... .20 9.00

than 4% sound whole kernels). round screen. \3/4\ inch slot

screen.

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

* * * * *

PART 998--MARKETING AGREEMENT REGULATING THE QUALITY OF

DOMESTICALLY PRODUCED PEANUTS

1. The authority citation for 7 CFR part 998 continues to read as

follows:

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

2. In Sec. 998.200, in paragraph (a)(1) the ``Maximum Limitation''

table is revised to read as follows:

Sec. 998.200 Outgoing quality regulation for 1997 and subsequent crop

peanuts.

* * * * *

[[Page 33243]]

MAXIMUM LIMITATIONS

[Excluding lots of ``splits'']

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

Unshelled Fall through

Unshelled peanuts, --------------------------------------------------------------------

peanuts and damaged Foreign

Type and grade category damaged kernels and materials Moisture

kernels minor Sound split and Sound whole kernels Total (percent) (percent)

(percent) defects broken kernels

(percent)

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

Runner.......................... 1.50 2.50 300%; \17/64\ inch 3.00%; \16/64\ x 4.00%................... .20 9.00

round screen. \3/4\ inch slot

screen.

Virginia (except No. 2)......... 1.50 2.50 3.00%; \17/64\ inch 3.00%; \15/64\ x 4.00% Both screens...... .20 9.00

round screen. 1 inch slot screen.

Spanish and Valencia............ 1.50 2.50 3.00%; \16/64\ inch 3.00%; \15/64\ x 4.00% Both screens...... .20 9.00

round screen. \3/4\ inch slot

screen.

No. 2 Virginia.................. 1.50 3.00 6.00%; \17/64\ inch 6.00%; \15/64\ x 6.00% Both screens...... .20 9.00

round screen. 1 inch slot screen.

Runner with splits (not more 1.50 2.50 3.00%; \17/64\ inch 3.00%; \16/64\ x 4.00% Both screens...... .10 9.00

than 15% sound splits). round screen. \3/4\ inch slot

screen.

Virginia with splits (not more 1.50 2.50 3.00%; \17/64\ inch 3.00%; \15/64\ x 4.00% Both screens...... .10 9.00

than 15% sound splits). round screen. 1 inch slot screen.

Spanish & Valencia with splits 1.50 2.50 3.00%; \16/64\ inch 2.00%; \15/64\ x 4.00% Both screens...... .10 9.00

(not more than 15% sound round screen. \3/4\ inch slot

splits). screen.

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

Lots of ``splits''

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

Runner (not more than 4% sound 2.00 2.50 3.00%; \17/64\ inch 3.00%; \14/64\ x 4.00% Both screens...... .20 9.00

whole kernels). round screen. \3/4\ inch slot

screen.

Virginia (not less than 90% 2.00 2.50 3.00%; \17/64\ inch 3.00%; \14/64\ x 4.00% Both screens...... .20 9.00

splits). round screen. 1 inch slot screen.

Spanish and Valencia (not more 2.00 2.50 3.00%; \16/64\ inch 3.00%; \13/64\ x 4.00% Both screens...... .20 9.00

than 4% sound whole kernels). round screen. \3/4\ inch slot

screen.

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

* * * * *

Dated: June 12, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-16269 Filed 6-17-98; 8:45 am]

BILLING CODE 3410-02-P