Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 1999-2000 Marketing Year

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV-99-985-1 PR]

Marketing Order Regulating the Handling of Spearmint Oil Produced

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

1999-2000 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would establish the quantity of spearmint

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

from, or handle for, producers during the 1999-2000 marketing year,

which begins on June 1, 1999. This proposal would establish salable

quantities and allotment percentages for Class 1 (Scotch) spearmint oil

of 1,199,290 pounds and 65 percent, respectively, and for Class 3

(Native) spearmint oil of 1,125,755 pounds and 55 percent,

respectively. The Spearmint Oil Administrative Committee (Committee),

the agency responsible for local administration of the marketing order

for spearmint oil produced in the Far West, recommended this rule for

the purpose of avoiding extreme fluctuations in supplies and prices,

and thus help to maintain stability in the spearmint oil market.

DATES: Comments must be received by December 17, 1998.

ADDRESSES: Interested persons are invited to submit written comments

concerning this proposed rule. Comments must be sent to the Docket

Clerk, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, PO Box

96456, Washington, DC 20090-6456; Fax: (202) 205-6632. Comments should

reference the docket number and the date and page number of this issue

of the Federal Register and will be made available for public

inspection in the Office of the Docket Clerk during regular business

hours.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing

Field Office, Marketing Order Administration Branch, Fruit and

Vegetable Programs, AMS, USDA, 1220 SW Third Avenue, room 369,

Portland, Oregon 97204; telephone: (503) 326-2724; Fax: (503) 326-7440;

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

Vegetable Programs, AMS, USDA, room 2525-S, PO Box 96456, Washington,

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

businesses may request information on complying with this regulation,

or obtain a guide on complying with fruit, vegetable, and specialty

crop marketing agreements and orders by contacting Jay Guerber,

Marketing Order Administration Branch, Fruit and Vegetable Programs,

AMS, USDA, PO Box 96456, room 2525-S, Washington, DC 20090-6456;

telephone (202) 720-2491, Fax: (202) 205-6632, or E-mail:

Jay__N__G[email protected]. You may view the marketing agreement and

order small business compliance guide at the following web site: http:/

/www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: This proposed rule is issued under Marketing

Order No. 985 (7 CFR part 985), as amended, regulating the handling of

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

designated parts of Nevada and Utah), hereinafter referred to as the

``order.'' This order is effective under the Agricultural Marketing

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

referred to as the ``Act.''

The Department of Agriculture (Department) is issuing this rule in

conformance with Executive Order 12866.

This proposed rule has been reviewed under Executive Order 12988,

Civil Justice Reform. Under the provisions of the marketing order now

in effect, salable quantities and allotment percentages may be

established for classes of spearmint oil produced in the Far West. This

proposed rule would

[[Page 63805]]

establish the quantity of spearmint oil produced in the Far West, by

class, that may be purchased from or handled for producers by handlers

during the 1999-2000 marketing year, which begins on June 1, 1999. This

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

policies, unless they present an irreconcilable conflict with this

rule.

The Act provides that administrative proceedings must be exhausted

before parties may file suit in court. Under section 608c(15)(A) of the

Act, any handler subject to an order may file with the Secretary a

petition stating that the order, any provision of the order, or any

obligation imposed in connection with the order is not in accordance

with law and request a modification of the order or to be exempted

therefrom. A handler is afforded the opportunity for a hearing on the

petition. After the hearing the Secretary would rule on the petition.

The Act provides that the district court of the United States in any

district in which the handler is an inhabitant, or has his or her

principal place of business, has jurisdiction to review the Secretary's

ruling on the petition, provided an action is filed not later than 20

days after date of the entry of the ruling.

Pursuant to authority contained in sections 985.50, 985.51, and

985.52 of the order, the Committee recommended the salable quantities

and allotment percentages for the 1999-2000 marketing year at its

October 7, 1998, meeting. With 6 members in favor, 1 member opposed,

and 1 member abstaining, the Committee recommended the establishment of

a salable quantity and allotment percentage for Class 1 (Scotch)

spearmint oil of 1,199,290 pounds and 65 percent, respectively. The

member in opposition favored the establishment of a lower salable

quantity and allotment percentage. With 6 members in favor and 2

members abstaining, the Committee recommended the establishment of a

salable quantity and allotment percentage for Class 3 (Native)

spearmint oil of 1,125,755 pounds and 55 percent, respectively. The

member abstaining does not currently produce Native spearmint oil. The

chairman, as is traditional with this committee, abstained on both the

Scotch and the Native spearmint oil recommendations.

This proposed rule would limit the amount of spearmint oil that

handlers may purchase from, or handle for, producers during the 1999-

2000 marketing year, which begins on June 1, 1999. Salable quantities

and allotment percentages have been placed into effect each season

since the order's inception in 1980.

The U.S. production of spearmint oil is concentrated in the Far

West, primarily Washington, Idaho, and Oregon (part of the area covered

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

The production area covered by the marketing order accounts for

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

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

production of Native spearmint oil.

When the order became effective in 1980, the United States produced

nearly 100 percent of the world's supply of Scotch spearmint oil, of

which approximately 80 percent was produced in the regulated production

area in the Far West. International production characteristics have

changed in recent years, however, with foreign Scotch spearmint oil

production contributing significantly to world production. Although

still a leader in production, the Far West's market share has decreased

to approximately 39 percent of the world total. Therefore, the

Committee's recommendation for Scotch spearmint oil could maintain

market stability by avoiding extreme fluctuations in supplies and

prices, and would help the industry remain competitive on an

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

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

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

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

well.

The order has contributed extensively to the stabilization of

producer prices, which prior to 1980 experienced wide fluctuations from

year to year. For example, between 1971 and 1975 the price of Native

spearmint oil ranged from $3.00 per pound to $11.00 per pound. In

contrast, under the order, prices have stabilized between $10.50 and

$11.50 per pound for the past ten years. The average price for Native

spearmint oil in 1997 was $11.00. With approximately 90 percent of the

U.S. production located in the Far West, the method of calculating the

Native spearmint oil salable quantity and allotment percentage

primarily utilizes information on price and available supply as they

are affected by the estimated trade demand.

The proposed salable quantity and allotment percentage for each

class of spearmint oil for the 1999-2000 marketing year is based upon

the Committee's recommendation and the data presented below.

(1) Class 1 (Scotch) Spearmint Oil

(A) Estimated carry-in on June 1, 1999--598,929 pounds. This figure

is derived by subtracting the estimated 1998-99 marketing year trade

demand of 900,000 pounds from the revised 1998-99 marketing year total

available supply of 1,498,929 pounds.

(B) Estimated world production for the 1998-99 marketing year--

3,280,758 pounds. This figure is based on information the Committee has

compiled.

(C) Estimated Far West production for the 1998-99 marketing year--

1,278,508 pounds.

(D) Approximate Far West percentage of total world production in

1998-99--39 percent. This is down from the 1980 level of approximately

80 percent.

(E) Total estimated allotment base for the 1999-2000 marketing

year--1,845,061 pounds. This figure represents a one percent increase

over the revised 1998-99 allotment base.

(F) Recommended 1999-2000 allotment percentage--65 percent. This

figure is based upon recommendations made at the October 7, 1998,

meeting, as well as at the five Scotch spearmint oil production area

meetings held during September.

(G) The Committee's computed 1999-2000 salable quantity--1,199,290

pounds. This figure is the product of the recommended allotment

percentage and the total estimated allotment base.

(H) Estimated available supply for the 1999-2000 marketing year--

1,798,219 pounds. This figure is derived by adding the computed salable

quantity to the estimated June 1, 1999, carry-in volume, and represents

the total amount of Scotch spearmint oil that could be available to the

market during the 1999-2000 marketing year.

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

the 1999-2000 marketing year--910,000 pounds. This figure is based upon

estimates provided to the Committee by buyers of spearmint oil.

(J) Estimated carry-out on June 1, 2000--888,219 pounds. This

figure is the difference between the 1999-2000 estimated trade demand

and the 1999-2000 estimated available supply.

(2) Class 3 (Native) Spearmint Oil

(A) Estimated carry-in on June 1, 1999--54,815 pounds. This figure

is the difference between the estimated 1998-99 marketing year trade

demand of 1,170,000 pounds and the revised 1998-99 marketing year total

available supply of 1,224,815 pounds.

[[Page 63806]]

(B) Estimated trade demand (domestic and export) for the 1999-2000

marketing year--1,155,000 pounds. This figure is based on the average

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

oil buyers.

(C) Salable quantity required from 1999 production--1,100,185

pounds. This figure is the difference between the estimated 1999-2000

marketing year trade demand and the estimated carry-in on June 1, 1999.

(D) Total estimated allotment base for the 1999-2000 marketing

year--2,046,828 pounds. This figure represents a one percent increase

over the revised 1998-99 allotment base.

(E) Computed allotment percentage--53.8 percent. This percentage is

computed by dividing the required salable quantity by the total

estimated allotment base.

(F) Recommended allotment percentage--55 percent. This is the

Committee's recommendation based on the computed allotment percentage

and input received at the four Native spearmint oil production area

meetings held during September.

(G) The Committee's recommended salable quantity--1,125,755 pounds.

This figure is the product of the recommended allotment percentage and

the total estimated allotment base.

The salable quantity is the total quantity of each class of

spearmint oil which handlers may purchase from or handle on behalf of

producers during a marketing year. Each producer is allotted a share of

the salable quantity by applying the allotment percentage to the

producer's allotment base for the applicable class of spearmint oil.

The Committee's recommended Scotch spearmint oil salable quantity

of 1,199,290 pounds and allotment percentage of 65 percent are based on

the Committee's goal of maintaining market stability by avoiding

extreme fluctuations in supplies and prices, and thereby helping the

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

recommended Native spearmint oil salable quantity of 1,125,755 pounds

and allotment percentage of 55 percent are based on anticipated supply

and trade demand during the 1999-2000 marketing year. The proposed

salable quantities are not expected to cause a shortage of spearmint

oil supplies. Any unanticipated or additional market demand for

spearmint oil which may develop during the marketing year can be

satisfied by an increase in the salable quantities. Both Scotch and

Native spearmint oil producers who produce more than their annual

allotments during the 1999-2000 season may transfer such excess

spearmint oil to a producer with spearmint oil production less than his

or her annual allotment or put it into the reserve pool.

This proposed regulation, if adopted, would be similar to those

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

handlers resulting from this proposed action are expected to be offset

by the benefits derived from a stable market, a greater market share,

and possible improved returns. In conjunction with the issuance of this

proposed rule, the Committee's marketing policy statement for the 1999-

2000 marketing year has been reviewed by the Department. The

Committee's marketing policy statement, a requirement whenever the

Committee recommends volume regulations, fully meets the intent of

section 985.50 of the order. During its discussion of potential 1999-

2000 salable quantities and allotment percentages, the Committee

considered: (1) The estimated quantity of salable oil of each class

held by producers and handlers; (2) the estimated demand for each class

of oil; (3) prospective production of each class of oil; (4) total of

allotment bases of each class of oil for the current marketing year and

the estimated total of allotment bases of each class for the ensuing

marketing year; (5) the quantity of reserve oil, by class, in storage;

(6) producer prices of oil, including prices for each class of oil; and

(7) general market conditions for each class of oil, including whether

the estimated season average price to producers is likely to exceed

parity. Conformity with the Department's ``Guidelines for Fruit,

Vegetable, and Specialty Crop Marketing Orders'' has also been reviewed

and confirmed.

The establishment of these salable quantities and allotment

percentages would allow for anticipated market needs. In determining

anticipated market needs, consideration by the Committee was given to

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

rule also provides producers with information on the amount of

spearmint oil which should be produced for next season in order to meet

anticipated market demand.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), the Agricultural Marketing Service (AMS) has considered the

economic impact of this action on small entities. Accordingly, the AMS

has prepared this initial regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of

business subject to such actions in order that small businesses will

not be unduly or disproportionately burdened. Marketing orders issued

pursuant to the Act, and rules issued thereunder, are unique in that

they are brought about through group action of essentially small

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

entity orientation and compatibility.

There are 9 spearmint oil handlers subject to regulation under the

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

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

in the regulated production area. Small agricultural service firms are

defined by the Small Business Administration (SBA)(13 CFR 121.601) as

those having annual receipts of less than $5,000,000, and small

agricultural producers have been defined as those whose annual receipts

are less than $500,000.

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

estimates that 2 of the 9 handlers regulated by the order would be

considered small entities. Most of the handlers are large corporations

involved in the international trading of essential oils and the

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

29 of the 124 Scotch spearmint oil producers and 14 of the 110 Native

spearmint oil producers would be classified as small entities under the

SBA definition. Thus, a majority of handlers and producers of Far West

spearmint oil may not be classified as small entities.

The Far West spearmint oil industry is characterized by producers

whose farming operations generally involve more than one commodity, and

whose income from farming operations is not exclusively dependent on

the production of spearmint oil. Crop rotation is an essential cultural

practice in the production of spearmint oil for weed, insect, and

disease control. A normal spearmint oil producing operation would have

enough acreage for rotation such that the total acreage required to

produce the crop would be about one-third spearmint and two-thirds

rotational crops. An average spearmint oil producing farm would thus

have to have considerably more acreage than would be planted to

spearmint during any given season. To remain economically viable with

the added costs associated with spearmint oil production, most

spearmint oil producing farms would fall into the SBA category of large

businesses.

This proposed rule would establish the quantity of spearmint oil

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

handle for, producers during the 1999-2000 marketing year. The

Committee

[[Page 63807]]

recommended this rule for the purpose of avoiding extreme fluctuations

in supplies and prices, and thus help to maintain stability in the

spearmint oil market. This action is authorized by the provisions of

sections 985.50, 985.51 and 985.52 of the order.

Small spearmint oil producers generally are not extensively

diversified and as such are more at risk to market fluctuations. Such

small farmers generally need to market their entire annual crop and do

not have the luxury of having other crops to cushion seasons with poor

spearmint oil returns. Conversely, large diversified producers have the

potential to endure one or more seasons of poor spearmint oil markets

because incomes from alternate crops could support the operation for a

period of time. Being reasonably assured of a stable price and market

provides small producing entities with the ability to maintain proper

cash flow and to meet annual expenses. Thus, the market and price

stability provided by the order potentially benefit the small producer

more than such provisions benefit large producers. Even though a

majority of handlers and producers of spearmint oil may not be

classified as small entities, the volume control feature of this order

has small entity orientation.

The order has contributed extensively to the stabilization of

producer prices, which prior to 1980 experienced wide fluctuations from

year to year. For example, between 1971 and 1975 the price of Native

spearmint oil ranged from $3.00 per pound to $11.00 per pound. In

contrast, under the order, prices have stabilized between $10.50 and

$11.50 per pound for the past ten years. The average price for Native

spearmint oil in 1997 was $11.00.

Alternatives to the proposal included not regulating the handling

of spearmint oil during the 1999-2000 marketing year, and recommending

either higher or lower levels for the salable quantities and allotment

percentages. The Committee reached its recommendation to establish

salable quantities and allotment percentages for both classes of

spearmint oil after careful consideration of all available information,

including: (1) The estimated quantity of salable oil of each class held

by producers and handlers; (2) the estimated demand for each class of

oil; (3) prospective production of each class of oil; (4) total of

allotment bases of each class of oil for the current marketing year and

the estimated total of allotment bases of each class for the ensuing

marketing year; (5) the quantity of reserve oil, by class, in storage;

(6) producer prices of oil, including prices for each class of oil; and

(7) general market conditions for each class of oil, including whether

the estimated season average price to producers is likely to exceed

parity. Based on its review, the Committee believes that the salable

quantity and allotment percentage levels recommended will achieve the

objectives sought.

Without any regulations in effect, the Committee believes the

industry would return to the pattern of cyclical prices of prior years,

as well as suffer the potentially price depressing consequence that a

release of the nearly 1.3 million pounds of spearmint oil reserves

would have on the market. According to the Committee, higher or lower

salable quantities and allotment percentages would not achieve the

intended goals of market and price stability, with market share

maintenance and growth.

Annual salable quantities and allotment percentages have been

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

Reporting and recordkeeping requirements have remained the same for

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

additional reporting or recordkeeping requirements on either small or

large spearmint oil producers and handlers. All reports and forms

associated with this program are reviewed periodically in order to

avoid unnecessary and duplicative information collection by industry

and public sector agencies. The Department has not identified any

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

proposed rule.

Finally, the Committee's meeting was widely publicized throughout

the spearmint oil industry and all interested persons were invited to

attend and participate on all issues. Interested persons are also

invited to submit information on the regulatory and informational

impacts of this action on small businesses.

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

opportunity to respond to the proposal, including any regulatory and

informational impacts of this action on small businesses. Thirty days

is deemed appropriate because this rule would need to be effective as

soon as possible to provide producers sufficient time prior to the

beginning of the 1999-2000 marketing year to adjust their cultural and

marketing plans accordingly. All written comments received within the

comment period will be considered before a final determination is made

on this matter.

List of Subjects in 7 CFR Part 985

Marketing agreements, Oils and fats, Reporting and recordkeeping

requirements, Spearmint oil.

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

proposed to be amended as follows:

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

PRODUCED IN THE FAR WEST

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

follows:

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

2. A new Sec. 985.218 is added to read as follows:

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

Regulations.

Sec. 985.218 Salable quantities and allotment percentages--1999-2000

marketing year.

The salable quantity and allotment percentage for each class of

spearmint oil during the marketing year beginning on June 1, 1999,

shall be as follows:

(a) Class 1 (Scotch) oil--a salable quantity of 1,199,290 pounds

and an allotment percentage of 65 percent.

(b) Class 3 (Native) oil--a salable quantity of 1,125,755 pounds

and an allotment percentage of 55 percent.

Dated: November 9, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-30673 Filed 11-16-98; 8:45 am]

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