Sweet Onions Grown in the Walla Walla Valley of Southeast Washington and Northeast Oregon; Recommended Decision and Opportunity To File Written Exceptions to Proposed Amendment of Marketing Agreement and Order No. 956

Federal RegisterSep 23, 1998

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 956

[Docket Nos. 98AMA-FV-956-1;FV98-956-1]

Sweet Onions Grown in the Walla Walla Valley of Southeast

Washington and Northeast Oregon; Recommended Decision and Opportunity

To File Written Exceptions to Proposed Amendment of Marketing Agreement

and Order No. 956

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule and opportunity to file exceptions.

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SUMMARY: This recommended decision invites written exceptions on

proposed amendments to the marketing agreement and order for sweet

onions grown in the Walla Walla Valley of Southeast Washington and

Northeast Oregon. The proposed amendments would broaden the scope of

the order by adding authority for grade, size, quality, maturity, and

pack regulations, mandatory inspection, marketing policy statements,

and minimum quantity exemptions. In addition, a proposal is included to

make a minor change in the Walla Walla Sweet Onion Committee

(committee) name. The committee is responsible for local administration

of the order. These proposals are intended to improve the operation and

functioning of the Walla Walla sweet onion marketing order program.

DATES: Written exceptions must be filed by October 23, 1998.

ADDRESSES: Written exceptions should be filed with the Hearing Clerk,

U.S. Department of Agriculture, room 1081-S, Washington, DC 20250-9200,

Facsimile number (202) 720-9776. Four copies of all written exceptions

should be submitted and they should reference the docket numbers and

the date and page number of this issue of the Federal Register.

Exceptions will be made available for public inspection in the Office

of the Hearing Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn, Marketing

Specialist, Marketing Order Administration Branch, Fruit and Vegetable

Programs, AMS, USDA, room 2525-S, Washington, D.C. 20250-0200;

telephone: (202) 720-1509, or 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, DC 20090-

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

SUPPLEMENTARY INFORMATION: Prior documents in this proceeding: Notice

of Hearing issued on March 25, 1998, and published in the April 1,

1998, issue of the Federal Register (63 FR 15787).

This administrative action is governed by the provisions of

sections 556 and 557 of Title 5 of the United States Code and,

therefore, is excluded from the requirements of Executive Order 12866.

Preliminary Statement

Notice is hereby given of the filing with the Hearing Clerk of this

recommended decision with respect to the proposed amendment of

Marketing Agreement and Order No. 956, regulating the handling of sweet

onions grown in the Walla Walla Valley of Southeast Washington and

Northeast Oregon (hereinafter referred to as the order), and the

opportunity to file written exceptions thereto. Copies of this decision

can be obtained from Kathleen M. Finn whose address is listed above.

This action is issued pursuant to the provisions of the

Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601

et seq.), hereinafter referred to as the ``Act,'' and the applicable

rules of practice and procedure governing the formulation of marketing

agreements and orders (7 CFR part 900).

The proposed amendment of Marketing Agreement and Order No. 956 is

based on the record of a public hearing held in Walla Walla,

Washington, on April 7, 1998. Notice of this hearing was published in

the Federal Register on April 1, 1998. The notice of hearing contained

proposals submitted by the committee.

The committee's proposed amendments would add the authority for

grade, size, quality, maturity, and pack regulations, mandatory

inspection, marketing policy statements, and minimum quantity

exemptions. In addition, the committee proposed changing its name from

the Walla Walla Sweet Onion Committee to the Walla Walla Sweet Onion

Marketing Committee.

Also, the Fruit and Vegetable Programs of the Agricultural

Marketing Service (AMS), U.S. Department of Agriculture, proposed to

allow such changes as may be necessary to the order, if any or all of

the above amendments are adopted, so that all of its provisions conform

with the proposed amendment.

At the conclusion of the hearing, the Administrative Law Judge

fixed May 8, 1998, as the final date for interested persons to file

proposed findings and conclusions or written arguments and briefs based

on the evidence received at the hearing. None were filed.

Material Issues

The material issues of record addressed in this decision are as

follows:

(1) Whether to add the authority for grade, size, quality,

maturity, and pack regulations, mandatory inspection, marketing policy

statements, and minimum quantity exemptions; and

(2) Whether to change the committee name to the Walla Walla Sweet

Onion Marketing Committee.

Findings and Conclusions

The findings and conclusions on the material issues, all of which

are based on evidence presented at the hearing and the record thereof,

are:

Material Issue Number 1

The Walla Walla sweet onion marketing order was promulgated in May

1995. The order sets forth the production area, which consists of

designated parts of Walla Walla County, Washington, and designated

parts of Umatilla County, Oregon. The order authorizes production and

marketing research and marketing development and promotion projects,

including paid advertising. In addition, the order authorizes the

establishment of container marking requirements.

The promulgation record indicates that the production area was

designated

[[Page 50803]]

as it currently is because it was determined that the unique soil and

growing conditions in that highly localized area constituted the

definitive and smallest geographical area recognized for the production

of Walla Walla sweet onions. The proponents of the marketing order did

not want any other geographic area to have the authority to use the

``Walla Walla Sweet Onion'' name. The promulgation hearing record

indicated that growers in the Walla Walla Valley spent time and effort

attempting to market the Walla Walla sweet onion as one that has unique

characteristics because of the area where it is grown. Other growers

and handlers were selling onions produced outside the production area

and marketing them as Walla Walla sweet onions, which the record

indicated was detrimental to the integrity of the name Walla Walla

sweet onions.

In addition, the proponents of the marketing order believed that

research and promotion efforts were imperative if the industry was to

remain competitive with other sweet onion areas. The proponents of the

marketing order believed that pooling available resources under a

marketing order for marketing and production research and promotion

would allow the industry to expand existing markets, create new ones,

improve grower returns and compete with other sweet onion growing

areas.

At the April 7, 1998, hearing on the proposed amendments to the

marketing order, the record revealed that prior to the promulgation

proceedings, the industry discussed including authority for quality and

size regulations in the order at that time. However, because of

consternation on the part of some growers about how quality and size

regulations would impact their individual businesses, it was determined

not to include the proposals at that time. The intent was that the

aspects of the marketing order that were included during the

promulgation proceeding would address the major problems facing the

industry.

Testimony at the amendment hearing indicated that the committee now

realizes that poor quality on the market is a serious marketing

problem. The committee believes that market share is being lost because

of inconsistent quality of Walla Walla sweet onions.

The committee has discussed quality problems since the order was

promulgated and delegated some of the discussions to a compliance

subcommittee. Recently, more serious discussions concerning quality

issues revealed that the majority of the industry supported moving

toward establishing minimum quality and size authority in the order.

Currently, the Walla Walla sweet onion industry is comprised of 71

industry members, 33 of which are registered handlers. There are a

total of 64 growers, which includes growers who are also handlers.

There are 7 commercial packinghouses that pack approximately 90 percent

of the industry's onions.

In 1997, 43 percent of the Walla Walla sweet onion crop was shipped

to the Pacific Northwest United States (U.S.); 20 percent to North

Central U.S.; 12 percent to export markets; 10 percent to the Western/

Southwestern U.S.; 7 percent to the Western U.S.; and 3 percent or less

to the Rocky Mountain states, Southeast and Northeast U.S. and to

roadside stands.

In 1988, 1,800 acres of Walla Walla sweet onions were planted. In

1997, 900 acres of Walla Walla sweet onions were planted and harvested.

This represents a 50 percent decline in plantings since 1988.

Similarly, acres harvested have decreased from 1,600 in 1988 to 900 in

1997. Yields during this period ranged from 600 50-pound containers to

820 50-pound containers per acre and averaged 734 50-pound containers.

Production of Walla Walla sweet onions for 1988 was 1,280,000 50-pound

containers. In 1997, production was 666,000 50-pound containers, a 48

percent decrease in production in the last 10 years.

Record testimony indicates that the major reasons for the decreases

in plantings and production relate to uncertainty of grower returns,

and the increased competition from other sweet onion production areas.

These other sweet onion areas have established higher quality standards

than Walla Walla sweet onions, and have made substantial promotional

efforts that make the competition with these areas challenging. In

addition, poor shelf life and storability problems concern many Walla

Walla sweet onion industry members. Although research is being

conducted on behalf of the committee to address these quality problems,

it has been difficult to keep pace with the competition.

The record testimony indicated that large wholesale and chainstore

markets have been lost due to quality and shelf life problems and that

if these issues were addressed successfully, these markets could be

regained. With a higher quality onion, more distant markets could be

established and production could increase significantly.

The season-average f.o.b. prices for Walla Walla sweet onions have

ranged from a low of $4.14 per 50-pound container in 1983 to a high of

$11.95 per 50-pound container in 1991. Prices have generally trended

upward, but have been highly variable, which suggests unsteady market

conditions. The average price over an 18-year period is $7.45 per 50-

pound container.

Since 1981, U.S. per capita consumption of fresh onions has

increased from 10.7 pounds per year to 17.5 pounds per year. A witness

testifying for the committee stated that other onion groups and

associations are promoting various onion products and increasing

consumer awareness and use of onions, in general. This grower-handler

further stated that Walla Walla sweet onions still have a nationally

recognizable name. He believed that if the industry could improve the

quality of their onions and be consistent with that quality, the

industry could stabilize their market, regain consumer and chainstore

confidence, and gain some of this share of the market indicated by the

increased per capita consumption of onions.

Walla Walla sweet onions are a type of sweet onion. Sweet onions

are distinguished from other onion groups by their sweet taste and the

absence of the strong, pungent taste of yellow, red, white and other

storage onions and are usually only available during the spring and

summer months. Generally, these onions do not store well and have a

short shelf life. In addition, sweet onions usually bring higher prices

than other onions.

Other sweet onion growing areas that compete with Walla Walla sweet

onions at some time during its season are: Georgia Vidalia Onions;

Texas hybrid 1015Y's (spring and summer crops), Maui Sweets from

Hawaii, and New Mex. Sweets from New Mexico.

Statistical data shows that Vidalia and Maui Sweet onions have

increased their acres harvested while others have declined. Texas has

the largest volume of acres harvested (average--14,839 acres) while

Maui has the smallest (average--142 acres). Surprisingly, these two

onion areas have the lowest yield per acre. Although yields in all

onion producing areas are highly variable, New Mexico and Walla Walla

have the highest yields.

Texas, New Mexico and Vidalia sweet onions have the highest

production, with Vidalia sweet onions experiencing the most dramatic

increase in production in recent years. Walla Walla and Maui onions

have the lowest production, mostly due to the amount of acres planted

in recent years.

Maui onions' f.o.b. prices are the highest among the sweet onion

[[Page 50804]]

producing areas with an average price of $43 per 50-pound container

over the last 18 years. Vidalia onions are second with an average price

of $14 per 50-pound container for a nine-year period. These two onion

groups have clearly differentiated their production from the other

sweet onion groups and are receiving premium prices. These higher

prices may be based on superior quality and taste. However, these

premium prices demonstrate the marketing potential for other sweet

onion producing areas. Walla Walla sweet onions averaged $7.50 per 50-

pound container during this same period.

Comparing Vidalia onions with Walla Walla sweet onions for the

nine-year period that Vidalia onion data has been available, Vidalia

onion prices have always been higher than Walla Walla sweet onion

prices. The difference in f.o.b prices ranges from a low of $1.50 per

50-pound container in 1994 to a high of $9.90 per 50-pound container in

1990. The average difference between the two prices is $5.

Crop value statistics (based on price and production) for the sweet

onion producing areas show that while Maui onions receive the highest

prices, its total crop value is the lowest of the six producing areas

due to its low level of production. Vidalia and New Mexico onion crop

values have been increasing, while Texas, Maui, and Walla Walla's crop

values have been stagnant or slowly declining. The high crop values of

Vidalia onions are the result of increasing levels of production and

higher prices.

A witness for the committee testified that poor quality and shelf

life of Walla Walla sweet onions limits marketing firms to distribute

their products into the nearer markets, particularly the Pacific

Northwest. The grower-handler testified that these shipping patterns

tend to saturate these markets. If quality and shelf life were

improved, more product could be shipped outside of the Pacific

Northwest area and thereby, increase production and improve crop values

of Walla Walla sweet onions.

Record testimony indicates that the potential exists for Walla

Walla sweet onions to become more competitive with other sweet onion

growing regions. A witness for the committee testified that he believes

that part of the Vidalia onion industry's success has been due to the

proximity of the growing area to a large population base on the East

Coast. However, if the quality of Walla Walla sweet onions was

improved, more onions could be shipped to those areas where sweet

onions are widely accepted by consumers, which would result in an

increase in total production of Walla Walla sweet onions.

The season for Walla Walla sweet onions generally begins in middle

or late June and continues until the end of July. The season is

approximately 6 weeks long. The Department's Market News Service

collects data on Walla Walla sweet onions. Prices are published for

jumbo and medium 50-pound sacks and cartons. This data shows that in

most seasons, the prices start relatively high. As the season

progresses, prices generally fall. The high prices at the beginning of

the season are due to the low supply of sweet onions at that time of

the season and the high demand as summer approaches. The quality at the

beginning of the season sets the market tone for the remainder of the

season. If quality is high at the beginning of the season, this makes a

favorable impression on receivers as well as consumers. With high

quality onions at the start of the season, consumers are more willing

to become repeat customers. However, if quality is low at the beginning

of the season, receivers as well as consumers will be disappointed.

This low quality will result in consumers shopping for alternative

sweet onions and they will not be repeat purchasers.

This seasonal price behavior where prices start high and then fall

may cause producers to harvest onions before they are fully matured.

This may result in poor quality onions being sold on the market which

tends to make an unfavorable impression on consumers, supermarkets, and

other outlets that handle Walla Walla sweet onions.

Most Walla Walla onions meet U.S. No. 2 grade but the majority do

not meet U.S. No. 1. Testimony revealed that the committee would not

make a recommendation to impose a minimum grade requirement that would

be difficult for most handlers to make and would result in a higher

volume of onions being unmarketable. Initially, the committee would

likely recommend a minimum grade, less than a U.S. No. 1, such as a

modified U.S. Commercial, with stronger maturity requirements. This

would enable handlers and growers to modify their operations in a cost-

effective manner. In time, as growers and handlers realize the benefits

of minimum quality and size requirements, they would be more prepared

to further increase the quality of their onions.

Record evidence revealed that the Walla Walla sweet onion marketing

season is shortening because of the typical high prices at the

beginning of the season. A witness for the committee testified that he

believes that growers are harvesting immature onions in order to obtain

these higher prices. The witness stated that immature onions on the

market early in the season have a negative impact on the market at the

middle and the end of the season. He further testified that growers are

concerned with this and are targeting this problem. He believes that

these problems could be alleviated to a great extent by establishing

quality standards for defects such as sprouting and staining which

would address the maturity problem early in the season and increase

demand for Walla Walla sweet onions for a longer period. He further

stated that if a higher quality product is consistently available,

promotional efforts would be enhanced. These efforts would improve

buyers' confidence in purchasing Walla Walla sweet onions.

Statistical data evidenced on the record indicates that Walla Walla

sweet onions are currently sorted by size and packed in cartons or

sacks. Different prices are realized between sacks and cartons and

between jumbo and medium sized onions. Higher prices are received for

cartons as compared to sacks. Higher prices are received for jumbo as

compared with medium size onions. Data shows that larger sized onions

receive an average of $3 a container more than smaller onions.

The record revealed that when purchasing sweet onions, consumers

prefer a larger onion. There is a perception that sweet onions should

be larger than storage onions. Consumers are willing to pay a premium

price for a larger sweet onion. Proper seed spacing during planting is

a critical factor in producing larger onions. In addition, handlers who

can pack larger onions can realize larger returns.

Since the majority of handlers are already sorting onions by size,

record evidence revealed that handlers would not have to purchase new

equipment should these proposals be implemented. A grower-handler

testified that the majority of the larger handlers always try to pack

to certain established quality and size standards. Costs associated

with handlers modifying their grading facilities would be minimal

because most handlers already have the equipment necessary to implement

these proposals. These proposals, if implemented, would require that

all handlers conform to the same established quality and size

standards, which would provide a consistent product to buyers and

consumers. A primary cost associated with these proposals would be the

cost of inspection procedures, which are

[[Page 50805]]

discussed later in this recommended decision.

Another potential cost item is the cost associated with growers

having to purchase additional or improved equipment in order to meet

minimum quality or size standards. A handler testified that growers

could update their mechanical seeders so that the seeds could be

planted equidistant from each other, which would result in onions with

better shape and uniformity and larger onions. There are increasingly

more growers that are purchasing this equipment or contracting with

other growers that have the seeders. Seed coating or pelleting is

another alternative to achieve better seed placement, which is less

expensive than the purchase of a highly advanced seeder. The seed

coating adds a clay-like material to the exterior of the seed, so that

the seeders do not cause two or three seeds to drop at the same time.

It appears that costs associated with growers modifying their cultural

practices to abide by minimum quality and size standards would be

minimal and offset by improved returns.

Currently, there are limited secondary outlets for Walla Walla

sweet onions. Record testimony indicates that the primary outlets for

non-marketable or cull onions are livestock feed, charitable

institutions or disposal. A minimal amount is sent to processors, but

there are no returns realized other than the reduced cost of packing.

If quality control and size provisions were implemented, it could

be assumed that more onions would become non-marketable which could

produce hardships for some producers. A witness for the committee

testified that if a U.S. Commercial grade were established as a minimum

quality standard, about 5 to 10 percent of the onions would not meet

that grade and would have to be disposed of in secondary outlets. The

witness testified that increased grower returns would offset any

increase in cull onions. In addition, if a minimum quality or size

standard were established, this would provide an incentive for growers

to modify and improve their cultural practices so that only onions that

would make that quality or size standard would be sent to the packing

houses. This would minimize the percentage of onions that do not make

quality or size standards.

The inspection and certification portion of the proposed amendments

would require that during any period when Walla Walla sweet onions are

regulated, the onions would be inspected by representatives of the

Federal-State Inspection Service. The proposal contains a provision

regarding re-inspection procedures. Handlers who handle a specified

minimum quantity would be exempt from inspection, but still be required

to meet any minimum quality or size regulations in effect. The minimum

quantity would be established at 2,000 pounds or less of onions per

shipment, but could be modified through informal rulemaking, if

necessary.

The Federal-State Inspection Service Office that is responsible for

inspecting Walla Walla sweet onions is currently located in Pasco,

Washington, less than 50 miles from Walla Walla. According to record

testimony, inspectors would be staffed in Walla Walla during the season

if mandatory inspection was implemented.

Inspection costs in the State of Washington are computed on an

hourly basis or a per unit basis, whichever is greater. If the hourly

rate is used, the rate applies to the total number of the inspector's

hours, including travel time. Depending upon the workload, inspectors

could be based in Walla Walla during the season, which would lessen

travel costs. Record testimony indicated that the hourly inspection

rate is $26, with a two-hour minimum, or $52, for inspection or $208

for an eight-hour day. However, the State of Washington Agriculture

Code regulations appearing at Chapter 16-400-210 WAC provide that the

hourly inspection rate is $23, with no minimum time required. In

accordance with the Rules of Practice and Procedure governing the

formulation of marketing agreements and orders (7 CFR Part 900),

official notice is taken of the fees set forth in the State of

Washington regulations at Chapter 16-400-210 WAC. The fee schedule will

be used in our analysis. On a per unit basis, the inspection fee is

$.04 per 50-pound unit.

As stated above, inspection costs are computed on an hourly basis

or a per unit basis, whichever is greater. For example, if an

inspection was requested on 100 50-pound containers and the inspection

lasted one hour, the per unit cost for inspecting the lot would be $4,

and the per hour cost would be $23. Under this scenario, the handler

would be charged $23 for the inspection, the greater amount. This would

average $.23 per unit.

Under the current fee schedule, it would be necessary for the

inspection office to inspect over 4,600 50-pound units of onions per

day in order to maintain the fee at $.04 per 50-pound unit. If handlers

do not handle over 4,600 50-pound units per day, their inspection costs

would be computed at the hourly rate. Even for handlers who normally

handle that volume, there would be times during the season,

particularly in the beginning and end of the season, where the volume

of onions inspected would not be at a level where the $.04 per 50-pound

unit could be used. The fees would convert to the hourly rate.

Record testimony indicated that the committee is concerned with

increased costs associated with these proposals, particularly, the

costs of inspection. The committee discussed options to address these

concerns and developed two remedies intended to alleviate the cost

burdens on small handlers. First, the committee recommended adding

authority in the order for the committee to contract with the Federal-

State Inspection Service and pay for all inspections of Walla Walla

sweet onions. Second, the committee recommended an exemption from

inspection for handlers of small lots of onions.

Under the scenario of contracting with the inspection service, each

handler would pay a separate assessment for inspection costs at a per

unit price. All handlers would pay the same price per bag for

inspection, whether exempt or not. Under such a contract, the larger

volume handlers would pay more of the inspection costs because they

handle so many more onions. In this manner, the burden of inspection

costs for smaller volume handlers would be minimized. This was

discussed at committee meetings with representatives of the inspection

service.

Testimony confirmed that travel costs would be lessened if an

inspector was based in Walla Walla. However, the witness indicated that

$.04 per 50-pound unit would be the minimum cost for the inspection.

Costs could increase depending on the workload. If the workload was

light, such as late in the season when the quantities of onions are

diminishing, it could be more costly for an inspector to conduct

inspections on smaller lots. It could be necessary to convert the cost

to an hourly cost, which would exceed $.04 per 50-pound unit.

A witness for the committee stated that there were discussions at

committee meetings regarding contractual relationships with the

inspection service but factors such as inspection of small quantities

would need to be addressed in the contract. The inspector testified

that the inspection office must cover the cost of inspectors and if

there was not a full day's work in Walla Walla, the inspector would

need to travel elsewhere. These situations would need to be factored

[[Page 50806]]

into any contractual agreements. Because of the variables associated

with inspecting Walla Walla sweet onions, a witness for the committee

estimated the cost of inspection would range between $.04 and $.06 per

50-pound unit if the per unit price were used in a contractual

agreement.

Another option the committee developed to address the issues of

costs on small handlers would provide an exemption for handlers who

handle up to, but not more than 2,000 pounds of Walla Walla sweet

onions per shipment. These handlers would be exempt from inspection

requirements, but these exempt onions would still be required to meet

the quality and size requirements in effect at the time of shipment.

Handlers could make more than one exempt shipment per day as long as

each shipment was at or below the 2,000-pound exemption. These exempt

onions would not be exempt from assessments. The committee would be

able to recommend modification of the minimum quantity exemption

through informal rulemaking, if necessary. The committee would be

responsible for monitoring compliance with this proposal. If necessary,

the committee would conduct spot inspections at the committee's expense

to ensure that inspection-exempt onions were meeting the established

quality and size regulations.

A witness for the committee projected that the committee manager's

work hours may need to be increased in order to monitor compliance with

these proposals, which could result in increased administrative costs

for the committee. The committee projects a possible increase of

$3,000, or a 3 percent increase in the current committee budget.

Currently, there are 7 commercial packers that pack approximately

90 percent of the industry's onions. The remaining 10 percent are

handled by approximately 26 handlers. If the 2,000 pound minimum

quantity exemption were implemented, it is estimated that 50 percent of

the remaining 26 handlers would be exempt from inspection. This would

represent approximately 42 acres (25,000 50-pound containers), or 5

percent of the crop. This minimum quantity exemption addresses concerns

regarding possible increased costs that could be encountered by small

handlers without jeopardizing the objectives of a quality and size

program.

Record testimony revealed that consideration to modify this

exemption provision would primarily relate to the effectiveness of the

amount exempted. If it was determined that 2,000 pounds or less was

insufficient, the committee could recommend raising the amount. A

similar recommendation could be made if it was determined the amount

was too large and too many onions were exempt from inspection. In

making any recommendations, consideration would be given to alleviating

any inordinate cost burden on handlers without jeopardizing the

objectives of quality and size requirements. Testimony indicated that

the committee does not believe it would ever recommend eliminating the

minimum quantity exemption.

The cost of inspection is a primary cost factor related to these

proposals. The record reveals that the industry is ready to accept this

additional cost in order to improve the competitiveness of the

industry. It is believed in the long run, increased production,

increased prices, and increased demand for Walla Walla sweet onions

would offset these inspection costs. The committee is concerned with

increased costs and is willing to take steps to mitigate these costs

for the benefit of the industry. It is believed that without

implementation of these proposals, the industry cannot improve and may

continue to decline.

Adding quality and size provisions to the marketing order would

provide an incentive for producers to allow their onions to fully

mature, resulting in a more favorable impression of the onions

purchased. Consumers prefer larger onions and are willing to pay a

premium price for large sweet onions. A better quality and larger onion

would provide an opportunity to establish consistent quality and size

of onions throughout the season. This would tend to benefit consumers

with a higher quality of onion and would benefit producers through a

higher demand for their product. In the long run, high quality,

seasonal product would build name recognition and help enhance demand

for Walla Walla sweet onions.

It is determined that there would be costs associated with

implementing these proposals. The primary costs relate to inspection

fees and administration by the committee for overseeing the program. In

addition, it is possible that some growers would need to modify their

cultural practices and handlers would need to modify their packing

operations in order to provide a higher quality product.

Witnesses testifying at the hearing represented small and large

handlers and growers. The majority of the industry is prepared to incur

some additional costs because they believe, that in the long run,

increased production and sales, and higher grower returns and buyer

confidence in Walla Walla sweet onions would offset any increased

costs. In fact, some growers testified that these proposals were not

strong enough. They would have been even more supportive of the

proposals if stronger quality requirements had been included.

One grower-handler testified that unless the minimum grade

regulations were established higher than a U.S. Commercial grade, they

would not benefit his company. He believed that the minimum grade

should not be lower than the standards to which most handlers already

pack. In addition, this grower-handler was concerned about the

committee being under-funded and wanted to be assured that these

proposals would be properly funded and that other programs, such as the

promotion program, would not suffer. In testimony, a witness noted that

the committee has considered the funding issues and has determined that

if these proposals were implemented, additional income would be

realized in the long run, which could be used for promotions and

research projects.

Another grower-handler testified that the industry used to ship

higher quality onions but perhaps because of lack of competition, the

quality decreased. Competition in the sweet onion business has

dramatically increased in recent years. The grower-handler stated that

the purpose of these proposals is for the industry to put a better

quality onion in the bag from the start, and then the onion would be a

better product when it reaches the consumer. As far as costs, this

grower-handler stated that the committee considered the costs very

seriously and even discussed the cost burden between larger and smaller

handlers. He believed the minimum quantity exemption addresses such

concerns.

This grower-handler also testified that Walla Walla sweet onions

are labor intensive and expensive to produce. With a quality control

system in place, poor quality onions could not be shipped by handlers.

Acreage could be increased, better prices could be realized, and

positive name recognition would result. Increased acreage and

production would result in additional funds for promotion and research,

including development of controlled atmosphere storage for Walla Walla

onions. In addition, the major cost of these proposals, the cost of

inspection, is not considered a high cost item compared to the cost of

labor and growing costs. Preharvest costs of production are estimated

to increase by 0.4 to 0.6 percent an acre due to inspection. Because so

much is invested up front per acre, a premium price is

[[Page 50807]]

necessary for growers to realize a reasonable return.

A witness for the proposals testified that lack of quality controls

has depleted repeat business. This handler did not believe that

handlers would need to purchase new equipment to implement grading

schemes in their businesses.

A witness testified that if these proposals are implemented,

possible increased administrative costs of $3,000 are projected. These

costs relate to the additional duties involved in overseeing compliance

of the inspection-exempt onions. The committee manager position is

currently a part-time position. The witness testified that the

committee has discussed increasing the hours of the manager's position

to provide adequate coverage of the new duties.

A witness for the committee indicated that an advertising agency

conducted market research at seven retail chains in the Los Angeles,

California area. The research concluded that the retail trade

perception of the Walla Walla sweet onion is that it is a high cost,

high shrink, and short shelf life alternative to low cost alternatives

already in the Los Angeles area. Retailers are concerned with paying a

premium price for a product with inconsistent quality.

Record evidence revealed that without the implementation of these

proposals, the Walla Walla sweet onion industry would remain stagnant

or decline further. With the tremendous rise in consumption of fresh

onions, and the success of other sweet onion producing areas, it is

clear that this industry has the potential to improve. These proposals

would enhance that opportunity.

The industry has attempted to regulate quality voluntarily. Prior

to implementation of the marketing order, the Walla Walla Sweet Onion

Commission, a voluntary organization composed of producers and

handlers, implemented quality requirements for its members. These

requirements restricted the sale of U.S. No. 2 grade onions and culls

from fresh market use, and included random inspections. Common defects

that caused the onions to fail to meet these conditions were seed

stems, immaturity, and decay. Because of the voluntary nature of these

imposed requirements, this project was unsuccessful.

Although the marketing order currently addresses problems the

industry is facing with the establishment of a production area and the

authority to conduct promotions and research projects, it is lacking in

that the current authorities cannot directly address the quality

problems that are detrimental to the industry. The record evidence

revealed that the establishment of quality control and size

requirements would specifically address the marketing problems being

experienced by the industry. The evidence showed conclusively that the

industry is facing further decline if nothing is done to improve the

quality of the onions marketed. Adding these authorities to the order

would enhance the program's effectiveness and provide the committee

with the tools needed to administer a productive, more useful program.

The committee is composed of 10 voting members. Seven concurring

votes, or a super majority, would be needed to pass a recommendation

relative to quality and size requirements. Other committee actions

require a simple majority or six votes. With the requirement of

preparing an annual marketing policy, the committee would review market

conditions each year. The committee could recommend that no regulations

be imposed on handlers.

It is determined that the costs related to implement these

proposals would be offset by improved grower returns, increased

production, re-established markets, new markets, and more effective

promotional efforts. Handlers are willing to impose these requirements

on themselves to save their industry. The record evidence provided a

compelling justification of these proposals.

Therefore, the proposals relating to authorizing quality control

and size requirements by adding new Sec. 956.15 (Grade and Size),

Sec. 956.16 (Pack), Sec. 956.60 (Marketing Policy), 956.70 (Inspection

and Certification) and amending Secs. 956.62 (Container Markings) and

956.64 (Minimum Quantities) are recommended.

As stated above, implementation of the above proposals would entail

adding and modifying several sections of the Walla Walla Sweet Onion

marketing order. These sections are interrelated and should be

considered together. For instance, there would be no need to have a

minimum quantity exemption if there were no mandatory inspection

requirements. If it is determined that these proposals would not

address problems facing the industry, none of the above proposals would

be implemented.

A new Sec. 956.14, a definition for ``grading'', would not be added

to the order. In the proposal, grading is defined as synonymous with

``preparing for market'' and means the sorting or separation of Walla

Walla Sweet Onions into grades, sizes, and packs for market purposes.

Currently, the term ``grading'' does not appear in the marketing

order. It is also not used in the proposed amendatory text. Testimony

indicated that the possibility exists for this term to be used in

future regulations.

If these proposals are adopted and regulations implemented,

handlers would be required to implement grading schemes in their

operations. Informal rulemaking actions would be necessary to implement

any minimum quality and size requirements. If this term is necessary in

the future, it can easily be included in the regulations without having

this term defined in the order. Therefore, this section is not proposed

herein.

A new Sec. 956.15, a definition for ``grade and size'', should be

added to the order. In the proposal, ``grade'' means any of the

officially established grades of onions and ``size'' means any of the

officially established sizes of onions, each set forth in the U.S.

Standards for grades of onions or the States of Washington and Oregon

standards. This section would authorize modifications or variations to

these standards if recommended by the committee and approved by the

Secretary.

It was determined that the above Federal and State standards would

be a commonly accepted basis for the committee to use in recommending

regulations on quality and size. The committee's intent is to have this

language flexible so that any subsequent amendments to these grade

standards would be applicable to the order.

Testimony indicated that it is common practice in the industry to

refer to onions by grades and/or sizes and these definitions would

provide a basis for making recommendations for regulations. The

proposal includes the authority to make variations from the U.S. and

State standards. This would allow the committee flexibility in

determining an appropriate quality or size to recommend which may

deviate from what the standards specify, but better serve the needs of

the industry. The definitions for grade and size are recommended.

A new Sec. 956.16, Pack, should be added to the order. ``Pack''

would be defined as a quantity of Walla Walla sweet onions specified by

grade, size, weight, or count or by type or condition of container

recommended by the committee and approved by the Secretary. Normally,

onions are sorted by grade or size. The intent of having a definition

for pack is to reduce the incidences of co-mingling grades and

[[Page 50808]]

sizes that could dissuade customers from purchasing the products. This

would provide the authority to restrict different grades and sizes to

certain containers in order to obtain higher prices and increase sales.

An example provided by a witness for the committee at the hearing

related to the possibility of establishing a premium pack which would

require a higher quality onion to be shipped in a container marked

``premium.'' The definition for pack is recommended.

A new Sec. 956.60, Marketing Policy, should be added to the order.

Specifically, this provision would require that the committee annually

consider and prepare a policy for marketing onions grown in the

production area prior to the beginning of the season. The committee's

marketing policy would rely on the conditions that exist at the time

the policy is adopted and projections for the upcoming season. It is

therefore, essential that the committee have as much information as

possible concerning marketing conditions, including information that

affects supply and demand.

Primary information that would assist the committee in determining

its marketing policy are supplies of Walla Walla sweet onions, expected

harvest, expected yield, quality, quality and supplies of competing

onions, and consumer preferences. The marketing policy would provide a

means of determining the recommendation of regulations relating to

quality and size for that year in order to prevent onions of inferior

quality or small size from being marketed. The marketing policy would

also assist the committee in recommending quality and size regulations

that would bring producers the greatest possible return consistent with

the supply and demand conditions, while protecting the interest of

consumers by making available for purchase better quality and preferred

sizes of onions. The marketing policy would focus on the optimization

of returns to growers given the conditions in the industry that year.

The committee would consider several factors in determining its

marketing policy. These factors include market prices for sweet onions,

supplies of sweet onions (including competitors), the trend and level

of consumer income, establishment and maintenance of orderly marketing

conditions, orderly marketing on behalf of the public, and other

relevant factors. A witness for the committee indicated that all of

this information is available through industry sources, the Department,

and University Extension Services. These available resources along with

the expertise of the committee members would guide the committee in

making informed effective marketing policies that would benefit growers

and consumers.

The committee would submit a report to the Secretary setting forth

the marketing policy and notify producers and handlers of the report.

Testimony indicated that the report would need to be prepared well

ahead of the shipping season, perhaps in January or February. A

specific due-date for the marketing policy could be established through

informal rulemaking, but the committee is aware that the policy must be

prepared well enough in advance of the season in order to be effective

and in order to effectuate timely regulations.

The marketing policy could also be amended depending on changed

supply and demand situations. Any amendments would be reported to the

Secretary and to producers and handlers.

Requiring the preparation of an annual marketing policy statement

is a good business practice to implement when establishing the

authority for quality control provisions. It would set forth a process

for the committee to follow and consider and provide adequate

timeframes to be effective. Therefore, this section is recommended.

Section 956.62, Issuance of Regulations, should be amended and re-

titled. This section is currently entitled ``Container markings'' and

sets forth the authority to recommend regulations for fixing the

marking of containers that may be used in the packaging or handling of

Walla Walla sweet onions.

The section would still include the regulations regarding container

markings but this proposal expands the section by adding the authority

for recommending regulations to the Secretary on quality and size. The

proposed amendment of this section would include the limitation of

shipments of Walla Walla sweet onions by: regulating grades, sizes,

qualities or maturities of Walla Walla sweet onions in any or all

portions of the production area during any period; regulating grades,

sizes, qualities or maturities for different varieties or packs for any

period; and establishing minimum standards of quality and maturity.

This section also provides that the Secretary may amend, terminate, or

suspend any or all portions of any regulation issued under this

section.

Portions of the production area or certain varieties could be

regulated, and record testimony revealed that this was recommended to

cover possible problems should a certain growing area or variety

experience a specific problem during the year, possibly due to adverse

weather conditions in one growing area. The overall intent of this

proposal is to establish the ability to make recommendations for the

entire industry and production area. Testimony revealed that the

proposal was meant to be flexible and cover a variety of situations

that could occur so that the amendment, if implemented, could be more

effective.

The proposed amendment is adequate to cover the needs of the

industry and has sufficient flexibility to cover any unusual

circumstances that may arise. Therefore, this section is recommended.

Section 956.64, Minimum Quantities, should be amended. This section

currently provides for establishing minimum quantities for which Walla

Walla sweet onions would be exempt from assessments, container

markings, and special purpose shipment requirements. The proposal

amends the section by adding a minimum quantity exemption for

inspection requirements.

Under this proposal, each handler could ship a maximum of 2000

pounds of sweet onions per shipment without regard to inspection

requirements. However, the exempt onions would still be required to

meet the quality and size requirements in effect at the time of

shipment. This requirement could be modified through informal

rulemaking.

The reason for the exemption is to provide a benefit for smaller

handlers. Onions would still be required to meet established quality

and size standards. It is estimated that only 5 percent of the crop

would not be inspected. If circumstances warrant modification of the

exemption amount in the future, it could be accomplished through

informal rulemaking. The amount of the exemption could be raised or

lowered depending on the effectiveness of the quality and size program

and the impact on handlers, especially small handlers. Testimony

revealed that reference should be made to Sec. 956.70, ``Inspection and

certification'' in the last sentence in the section. This reference has

been added to the amendatory language. Therefore, this section is

recommended as modified.

The committee proposes adding a new Sec. 956.70, Inspection and

Certification. This section sets forth the inspection requirements if

these proposals are implemented. The section states that during periods

of regulation, no onions, unless exempted, could be handled unless a

representative of the Federal-State Inspection Service or another

inspection service designated by the Secretary inspects the onions.

This section allows for modification of

[[Page 50809]]

these requirements through informal rulemaking.

If onions are regraded, resorted, or repacked, the prior inspection

would be invalid. If the onions are regraded, resorted or repacked,

they must be re-inspected to ensure that the quality or size

established is met prior to shipment of re-inspected onions. These

requirements could also be modified through informal rulemaking.

The committee could recommend that appropriate seals, stamps, or

tags identify the inspected onions, or that other identification be

affixed to the containers or master containers.

The committee could recommend the length of time for which an

inspection is valid and inspection certificates would be made available

to the committee. Finally, the section would authorize the committee to

enter into an agreement with the inspection service with respect to

costs of inspection and the committee would collect pro-rata shares of

such costs from handlers.

The portion relating to contracting with the inspection service

would cover a situation where the committee would try to lessen the

financial burden on handlers, especially by paying for all inspections

and assessing a pro-rata share back to the handlers. A witness

representing the inspection service testified that this was possible

but variables would have to be incorporated into any contractual

arrangement to cover all costs incurred by the inspection service. It

is reasonable to allow this provision in the order should a contractual

arrangement be necessary, to provide additional flexibility. Section

956.70(f) of this section has been modified to clarify that the

inspection service is as set forth in paragragh (a) of that section.

Regarding the identification procedures, the committee could

recommend that all onions have positive lot identification or PIQ

(Partners in Quality) certification. These procedures are

identification processes developed by the Department's inspection

service to aid in maintaining identity and integrity of products after

inspection. The proposed amendment was written as such to allow for

flexibility in determining the most effective and beneficial procedure

to use. For example, if a new identification process is developed by

the Department, the proposed amendment would allow the committee to

consider and recommend this new process.

Regarding establishing a time of validity for inspection

certificates, testimony revealed that Walla Walla sweet onions are not

stored and have a short shelf life. Three to five days is the maximum

that onions should be stored. Therefore, it is anticipated that the

committee could recommend a certificate validity of three to five days.

These inspection procedures are normal and customary procedures set

forth in marketing orders when mandatory inspection requirements are

authorized. They provide sufficient flexibility without losing

effectiveness. Therefore, this section is recommended.

Material Issue Number 2

The committee proposes to change its name from the Walla Walla

Sweet Onion Committee to the Walla Walla Sweet Onion Marketing

Committee. This proposal would entail an amendment to paragraph (a) of

Sec. 956.20, Establishment and membership, which sets forth the name of

the committee. The reason for the proposed change is to better reflect

the goals and accomplishments of the committee.

The committee believes adding the word ``marketing'' to their name

would better reflect the goals of the committee and better portray the

image sought. The committee is charged with improving the marketing

practices of Walla Walla sweet onions by using the authorities in the

marketing order and therefore, this proposal should be authorized.

The Agricultural Marketing Service proposed to make such changes as

may be necessary to the order to conform with any amendment that may

result from the hearing. No necessary conforming changes have been

identified by the Department.

Small Business Considerations

Pursuant to the 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 so that small businesses will not be

unduly or disproportionately burdened. Small agricultural producers

have been defined by the Small Business Administration (SBA) (13 CFR

121.601) as those having annual receipts of less than $500,000. Small

agricultural service firms, which include handlers regulated under the

order, are defined as those with annual receipts of less than

$5,000,000.

Interested persons were invited to present evidence at the hearing

on the probable regulatory and informational impact of the proposed

amendments on small businesses. The record indicates that growers and

handlers would not be unduly burdened by any additional regulatory

requirements, including those pertaining to reporting and

recordkeeping, that might result from this proceeding.

During the 1996-97 crop year, approximately 33 handlers were

regulated under Marketing Order No. 956. In addition, there were about

64 producers of Walla Walla sweet onions in the production area.

Marketing orders and amendments thereto are unique in that they are

normally brought about through group action of essentially small

entities for their own benefit. Thus, both the RFA and the Act are

compatible with respect to small entities.

Twenty-four of the 33 handlers are also producers who handle their

own onions. There are seven commercial packinghouses that pack

approximately 90 percent of all Walla Walla sweet onions. In the 1996-

97 season, the average f.o.b. price for Walla Walla sweet onions was

$8.70 per 50-pound sack. Total production for the 1996-97 season was

666,000 50-pound containers. A handler who packed over 550,000 50-pound

units would exceed the SBA definition of a small handler. According to

record evidence, there are two dominant handlers in the industry and at

least one of these handlers could be considered a large handler under

this definition. The record revealed that all Walla Walla sweet onion

growers would be considered small producers. Therefore, it can be

concluded that the majority of growers and handlers would be considered

small businesses.

The marketing order, promulgated in 1995, currently defines the

production area where onions must be grown to be designated as Walla

Walla sweet onions. It also provides the authority to fund research and

promotion activities through assessments on handlers, as well as

establish container regulations. Although the marketing order as

currently written addresses some of the marketing problems facing the

industry, the Walla Walla sweet onion industry continues to experience

marketing problems.

Economic data presented on the record indicates that the acres

planted have decreased from 1,800 in 1988 to 900 acres planted in 1997.

This is a 50% decrease since 1988. Similarly, acres harvested have

decreased from 1,600 in 1988 to 900 in 1997.

In addition, the data shows production has decreased dramatically

from 1,280,000 50-pound containers in 1988 to 666,000 50-pound

containers in 1997. This is a 48% decrease in production in the last 10

years.

Total crop values have declined from $9,345,000 in 1989 to

$5,794,000 in

[[Page 50810]]

1997. This is a 38% decrease in total crop values in 9 years.

U.S. per capita consumption of fresh onions has increased from 10.7

pounds per year in 1981 to 17.5 pounds per year in 1997. This is a 64%

increase in per capita use of fresh onions, while the production of

Walla Walla sweet onions has decreased. This increased consumption

shows that this industry has the potential to improve.

In addition, economic data shows that competition from other sweet

onion producing areas has increased dramatically. Producers of Walla

Walla sweet onions have lost market share to other sweet onions such as

Georgia Vidalia onions, California Imperial onions, Hawaii Maui Sweets,

New Mex. Sweets from New Mexico, and Texas hybrid 1015Y's.

The acres harvested and production of Vidalia onions have increased

by 236% and 447%, respectively, since 1989. The Vidalia sweet onion

industry's normal harvesting and shipping season begins in the middle

of April and ends in late July. The Vidalia onion industry has been

successful in extending its shipping season into September and October

by establishing controlled atmosphere storage capabilities. This may be

having a price dampening effect on Walla Walla sweet onions because of

the overlap of shipping seasons and direct competition caused by the

extended season of Vidalia onions.

Of the six sweet onion-producing areas in the U.S., Walla Walla

sweet onion prices are lower than Maui, Vidalia and Texas onions. In

addition, the economic report presented on the record shows that

Vidalia onions always receive higher prices than Walla Walla sweet

onions with an average price differential of $5 per 50-pound container.

The Walla Walla sweet onion season begins in middle or late June

and continues until the end of July. The shipping season lasts for

approximately six weeks. Prices for Walla Walla sweet onions at the

beginning of the season start relatively high. As the season

progresses, prices generally fall. This seasonal price behavior has

resulted in producers harvesting onions before they are fully matured.

This has led to poor quality onions being sold on the market that make

an unfavorable impression on consumers, supermarkets, and other outlets

that handle Walla Walla sweet onions. In addition, this situation

appears to have shortened the marketing season.

The quality at the beginning of the season has a tendency to set

the market tone for the remainder of the season. If quality is high at

the beginning of the season, this makes a favorable impression on

buyers as well as consumers. With high quality onions at the start of

the season, consumers are likely to become repeat customers. However,

if quality is low at the beginning of the season, receivers as well as

consumers are disappointed. Initial low quality will result in

consumers shopping for alternative sweet onions and they will not be

repeat purchasers.

Minimum quality and size requirements are established under

marketing orders to ensure that substandard produce does not find its

way to the market and destroy consumer confidence and harm producers'

returns. The objective of implementing quality control and size

provisions under marketing orders is to make the markets work more

efficiently, improve quality, and to market preferred sizes. The use of

quality and size standards through a grading scheme benefits consumers

by assuring the buyers that they are getting high quality produce of

desirable size. This helps build consumer demand in the long run.

Minimum quality and size standards are deemed desirable because they

prevent the shipment of poor quality produce, which ends up harming

producers' ability to sell their product and consumers' willingness to

buy.

The reputation of Walla Walla sweet onions has deteriorated over

the recent years due to the poor quality of some of the onions

marketed. Record evidence indicated that a surveillance project

conducted during the 1997 harvest season by the Washington State

Department of Agriculture on behalf of the committee noted that a

significant amount of onions sold within the immediate Walla Walla area

did not meet minimum U.S. standards. Walla Walla sweet onions usually

meet at least U.S. No. 2 grade, but only a small volume meets U.S. No.

1 grade.

Establishing quality and size provisions under the Walla Walla

sweet onion marketing order would provide an incentive for producers to

allow their onions to fully mature, resulting in a higher quality of

onion marketed. Establishing quality and size requirements would ensure

consistent quality and acceptable sizes of onions throughout the

season. This tends to benefit consumers through a higher quality of

onion and benefits producers with a higher demand for their product. In

the long run, high quality, seasonal produce builds name recognition

and helps enhance demand.

The Walla Walla sweet onion industry has attempted to voluntarily

implement quality control. Prior to implementation of the marketing

order, the Walla Walla Sweet Onion Commission, a voluntary organization

composed of producers and handlers, implemented quality rules for its

members. These rules restricted the sale of U.S. No. 2 grade onions and

culls from fresh market use, and included random inspections. Common

defects that caused the onions to fail to meet these requirements were

seed stems, immaturity, and decay. Because of the voluntary nature of

these imposed regulations, this project was unsuccessful.

Currently, the marketing order allows only onions grown in the

designated production area to be marketed as Walla Walla sweet onions.

Research activities as well as promotional activities are also

authorized under the current order. Broadening the scope of the order

by authorizing minimum quality and size requirements would add another

marketing tool to help the industry solve marketing problems,

especially those related to quality. Minimum quality and size

requirements would allow the industry to improve their name recognition

with a quality product. Amending the order by authorizing the

establishment of minimum quality and size requirements would help to

expand markets and deliver a more consistent quality product of

desirable size to the consumer.

Without any quality and size provisions in place, industry members

can place substandard product on the market that is severely impacting

the credibility and marketability of all Walla Walla sweet onions.

Because of these current practices, the industry is experiencing

problems establishing and maintaining markets in areas that have

traditionally been strong. The industry has lost markets due to poor

quality, short shelf life and increased competition from other sweet

onion producing areas.

Minimum quality and size requirements would help alleviate some of

these problems and work to improve producer returns by strengthening

consumer and retail demand. Mandatory inspection requirements would

make all producers and handlers responsible for the quality of the

industry's output. Poor quality would not be mixed with better quality.

The record revealed that most handlers are already sorting by size. The

Department's Market News Service reports prices for jumbo and medium

onions, which further indicates that handlers are sorting by size. Most

handlers also pack to a certain quality standards, usually based on

U.S. grade standards. Therefore, handlers would

[[Page 50811]]

not be required to drastically modify their packing operations or

purchase new equipment. The committee considered grower and handler

costs very seriously and even discussed the cost burden between larger

and smaller handlers. The minimum quantity exemption should address

such concerns.

Growers may be faced with a potential cost item related to improved

equipment that could be needed in order to meet minimum quality or size

standards. A handler testified that growers could update their

mechanical seeders so that the seeds could be planted equidistant from

each other, which would result in onions with better shape, more

uniformity and larger size. There are increasingly more growers that

are purchasing this equipment or contracting with other growers that

have the seeders. Seed coating or pelleting is another alternative for

better seed placement, which is less expensive than the purchase of a

highly advanced seeder. The seed coating adds a clay-like material to

the exterior of the seed, so that the seeders do not cause two or three

seeds to drop at the same time. It appears that costs associated with

growers modifying their cultural practices to abide by minimum quality

and size standards would be minimal and offset by improved producer

returns.

A witness for the committee testified that the benefits of

including the authority for minimum quality and size standards would

far outweigh any negative impact to producers and handlers and the

industry could start rebuilding markets and creating new ones.