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

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV98-985-1 FR]

Marketing Order Regulating the Handling of Spearmint Oil Produced

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

1998-99 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule establishes the quantity of spearmint oil produced

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

for, producers during the 1998-99 marketing year. The Spearmint Oil

Administrative Committee (Committee), the agency responsible for local

administration of the marketing order for spearmint oil produced in the

Far West, recommended this rule for the purpose of avoiding extreme

fluctuations in supplies and prices, and thus help to maintain

stability in the spearmint oil market.

EFFECTIVE DATES: June 1, 1998, through May 30, 1999.

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

Field Office, Marketing Order Administration Branch, Fruit and

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

Portland, Oregon 97204; telephone: (503) 326-2043; Fax: (503) 326-7440;

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

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

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

businesses may request information on compliance with this regulation

by contacting: Jay Guerber, Marketing Order Administration Branch,

Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 96456,

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

6632.

SUPPLEMENTARY INFORMATION: This final 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 final rule has been reviewed under Executive Order 12988,

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

in effect, salable quantities and allotment percentages may be

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

rule establishes the quantity of spearmint oil produced in the Far

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

handlers during the 1998-99 marketing year, which begins on June 1,

1998. This rule will not preempt any State or local laws, regulations,

or policies, unless they present an irreconcilable conflict with this

rule.

The Act provides that administrative proceedings must be exhausted

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

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

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

obligation imposed in connection with the order is not in accordance

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

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

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

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

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

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

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

days after date of the entry of the ruling.

Pursuant to authority contained in sections 985.50, 985.51, and

985.52 of the order, the Committee recommended the salable quantities

and allotment percentages for the 1998-99 marketing year at its October

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

member opposed, the Committee recommended the establishment of a

salable quantity and allotment percentage for Class 1 (Scotch)

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

member in opposition favored the establishment of a higher salable

quantity and allotment percentage. In a unanimous vote, the Committee

recommended the establishment of a salable quantity and allotment

percentage for Class 3 (Native) spearmint oil of 1,155,217 pounds and

57 percent, respectively.

This final rule limits the amount of spearmint oil that handlers

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

marketing year, which begins on June 1, 1998. Salable quantities and

allotment percentages have been placed into effect each season since

the order's inception in 1980.

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

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

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

The production area covered by the marketing order accounts for

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

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

production of Native spearmint oil.

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

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

which approximately 80 percent was produced in the regulated production

area in the Far West. International production characteristics have

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

production contributing significantly to world production. Although

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

to approximately 41 percent of the world total. Therefore, the

Committee's recommendation for Scotch spearmint oil is designed to

maintain market stability by avoiding extreme fluctuations in supplies

and

[[Page 8560]]

prices, and may help the industry remain competitive on an

international level by potentially 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. 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 salable quantity and allotment percentage for each class of

spearmint oil for the 1998-99 marketing year is based upon the

Committee's recommendation and the data presented below.

(1) Class 1 (Scotch) Spearmint Oil

(A) Estimated carry-in on June 1, 1998--456,994 pounds. This figure

is derived by subtracting the estimated 1997-98 marketing year trade

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

available supply of 1,310,981 pounds.

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

2,186,128 pounds.

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

892,628 pounds.

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

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

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

1,826,272 pounds. This figure represents a one percent increase over

the revised 1997-98 allotment base.

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

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

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

September.

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

pounds. This figure is the product of the recommended allotment

percentage and the total estimated allotment base.

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

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

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

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

during the 1998-99 marketing year.

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

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

estimates provided to the Committee by buyers of spearmint oil.

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

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

the 1998-99 estimated available supply.

(2) Class 3 (Native) Spearmint Oil

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

is the difference between the estimated 1997-98 marketing year trade

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

available supply of 1,184,756 pounds.

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

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

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

oil buyers.

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

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

marketing year trade demand and the estimated carry-in on June 1, 1998.

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

2,026,696 pounds. This figure represents a one percent increase over

the revised 1997-98 allotment base.

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

computed by dividing the required salable quantity by the total

estimated allotment base.

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

Committee's recommendation based on the computed allotment percentage.

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

This figure is the product of the recommended allotment percentage and

the total estimated allotment base.

The salable quantity is the total quantity of each class of

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

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

the salable quantity by applying the allotment percentage to the

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

The Committee's recommended Scotch spearmint oil salable quantity

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

the Committee's goal of maintaining market stability by avoiding

extreme fluctuations in supplies and prices, and thereby helping the

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

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

and allotment percentage of 57 percent are based on anticipated supply

and trade demand during the 1998-99 marketing year. The salable

quantities are not expected to cause a shortage of spearmint oil

supplies. Any unanticipated or additional market demand for spearmint

oil which may develop during the marketing year can be satisfied by an

increase in the salable quantities. Both Scotch and Native spearmint

oil producers who produce more than their annual allotments during the

1998-99 season may transfer such excess spearmint oil to a producer

with spearmint oil production less than his or her annual allotment or

put it into the reserve pool.

This regulation is similar to those which have been issued in prior

seasons. Costs to producers and handlers resulting from this 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 rule, the Committee's marketing policy

statement for the 1998-99 marketing year has been reviewed by the

Department. The Committee's marketing policy statement, a requirement

whenever the Committee recommends volume regulations, fully meets the

intent of section 985.50 of the order. During its discussion of

potential 1998-99 salable quantities and allotment percentages, the

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

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

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

total of allotment bases of each class of oil for the current marketing

year and the estimated total of allotment bases of each class for the

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

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

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

whether the estimated season average price to producers is likely to

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

Vegetable, and Specialty Crop

[[Page 8561]]

Marketing Orders'' has also been reviewed and confirmed.

The establishment of these salable quantities and allotment

percentages allows 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 final regulatory flexibility analysis.

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

business subject to such actions in order that 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 two of the nine handlers regulated by the order would be

considered small entities. Most of the handlers are large corporations

involved in the international trading of essential oils and the

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

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

spearmint oil producers would be classified as small entities under the

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

spearmint oil may not be classified as small entities.

The Far West spearmint oil industry is characterized by producers

whose farming operations generally involve more than one commodity, and

whose income from farming operations is not exclusively dependent on

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

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

disease control. A normal spearmint oil producing operation would have

enough acreage for rotation such that the total acreage required to

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

rotational crops. An average spearmint oil producing farm would thus

have to have considerably more acreage than would be planted to

spearmint during any given season. Most farms producing spearmint oil

would fall under the SBA category of large businesses due to the added

costs associated with the production of this crop.

This final rule establishes the quantity of spearmint oil produced

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

for, producers during the 1998-99 marketing year. The Committee

recommended this rule for the purpose of avoiding extreme fluctuations

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

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

sections 985.50, 985.51 and 985.52 of the order.

Small spearmint oil producers generally are not extensively

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

small producers generally need to market their entire annual crop and

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

poor spearmint oil returns. Conversely, large diversified producers

have the potential to endure one or more seasons of poor spearmint oil

markets because incomes from alternate crops could support the

operation for a period of time. Being reasonably assured of a stable

price and market provides small producing entities with the ability to

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

and price stability provided by the order potentially benefit the small

producer more than such provisions benefit large producers. Even though

a majority of handlers and producers of spearmint oil may not be

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

has small entity orientation.

The order has contributed extensively to the stabilization of

producer prices, which prior to 1980 experienced wide fluctuations from

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

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

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

$11.50 per pound for the past ten years.

Alternatives to this rule were discussed at the meeting and

included not regulating the handling of spearmint oil during the 1998-

99 marketing year, and recommending either higher or lower levels for

the salable quantities and allotment percentages. The Committee reached

its decision to recommend the establishment of salable quantities and

allotment percentages for both classes of spearmint oil for the 1998-99

marketing year after careful consideration of all available

information, including: (1) The estimated quantity of salable oil of

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

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

total of allotment bases of each class of oil for the current marketing

year and the estimated total of allotment bases of each class for the

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

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

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

whether the estimated season average price to producers is likely to

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

salable quantity and allotment percentage levels recommended will

achieve the objectives sought.

Without any regulations in effect, the Committee believes the

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

as well as suffer the potentially price depressing consequence that a

release of the nearly 1.2 million pounds of spearmint oil reserves

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

salable quantities and allotment percentages would not achieve the

intended goals of market and price stability, with market share

maintenance and growth.

Annual salable quantities and allotment percentages have been

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

Reporting and recordkeeping requirements have remained the same for

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

additional reporting or recordkeeping requirements on either small or

large spearmint oil producers and handlers. All reports and forms

associated with this program are reviewed periodically in order to

avoid unnecessary and duplicative information collection by industry

and public sector agencies. The Department has not identified any

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

rule.

A proposed rule was published in the Federal Register (62 FR 67297)

on

[[Page 8562]]

December 24, 1997. A 30-day comment period was provided to allow

interested persons the opportunity to respond to the proposal,

including any regulatory and informational impacts of this action on

small businesses. Copies of the rule were faxed and mailed to the

Committee office, which in turn notified Committee members and

spearmint oil producers and handlers of the proposed action. In

addition, the Committee's meetings were widely publicized throughout

the spearmint oil industry and all interested persons were invited to

attend and participate on all issues. A copy of the proposal was also

made available on the Internet by the U.S. Government Printing Office.

No comments were received.

Accordingly no changes are made to the rule as proposed.

After consideration of all relevant matter presented, including the

information and recommendation submitted by the Committee and other

available information, it is hereby found that this rule, as

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

the Act.

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, CFR part 985 is amended

as follows:

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

PRODUCED IN THE FAR WEST

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

follows:

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

2. A new Sec. 985.217 is added to read as follows:

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

Regulations.]

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

marketing year.

The salable quantity and allotment percentage for each class of

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

shall be as follows:

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

and an allotment percentage of 65 percent.

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

and an allotment percentage of 57 percent.

Dated: February 12, 1998.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 98-4036 Filed 2-19-98; 8:45 am]

BILLING CODE 3410-02-P