Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; Limiting the Volume of Small Red Seedless Grapefruit

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV99-905-3 IFR]

Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;

Limiting the Volume of Small Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This interim final rule limits the volume of small red

seedless grapefruit entering the fresh market under the marketing order

covering oranges, grapefruit, tangerines, and tangelos grown in

Florida. The marketing order is administered locally by the Citrus

Administrative Committee (committee). This rule limits the volume of

size 48 and/or size 56 red seedless grapefruit handlers can ship during

the first 11 weeks of the 1999-2000 season. The weekly percentage for

the first two weeks (September 20 through October 3) is 45 percent; for

the third week (October 4 through October 10) is 40 percent; for the

fourth through seventh weeks (October 11 through November 7) is 37

percent; and for the last four weeks (November 8 through December 5) is

32 percent. This limitation is designed to provide a sufficient supply

of small sized red seedless grapefruit to meet market demand, without

saturating all markets with these small sizes. This rule should help

stabilize the grapefruit market and improve grower returns.

DATES: Effective September 20, 1999. Comments received by September 27,

1999 will be considered prior to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments

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

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

Washington, DC 20090-6456; Fax: (202) 720-5698 or E-mail:

[email protected]. All comments should reference the docket

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

Register and will be made available for public inspection in the Office

of the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: William G. Pimental, Southeast

Marketing Field Office, F&V, AMS, USDA, P.O. Box 2276, Winter Haven,

Florida 33883-2276; telephone: (941) 299-4770, Fax: (941) 299-5169; or

George Kelhart, Technical Advisor, Marketing Order Administration

Branch, F&V, AMS, USDA, room 2522-S, P.O. Box 96456, Washington, DC

20090-6456; telephone: (202) 690-3919, Fax: (202) 720-5698. 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) 720-

5698 or E-mail: Jay.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 rule is issued under Marketing

Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR

part 905), regulating the handling of oranges, grapefruit, tangerines,

and tangelos grown in Florida, hereinafter referred to as the

``order.'' The marketing agreement and order are effective under the

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

674), hereinafter referred to as the ``Act.''

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

conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. This rule limits the volume of size 48 and/or size 56

red seedless grapefruit handlers can ship during the first 11 weeks of

the 1999-2000 season which begins in September. This rule will not

preempt any State or local laws, regulations, or policies, unless they

present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted

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

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

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

obligation imposed in connection with the order is not in accordance

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

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

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

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

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

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

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

days after date of the entry of the ruling.

The order provides for the establishment of grade and size

requirements for Florida citrus, with the concurrence of the Secretary.

These grade and size requirements are designed to provide fresh markets

with citrus fruit of acceptable quality and size. This helps create

buyer confidence and contributes to stable marketing conditions. This

is in the interest of growers, handlers, and consumers, and is designed

to increase returns to Florida citrus growers. The current minimum

grade standard for red seedless grapefruit is U.S. No. 1, and the

minimum size requirement is size 56 (at least 3 \5/16\ inches in

diameter).

Section 905.52 of the order provides authority to limit shipments

of any grade or size, or both, of any variety of Florida citrus. Such

limitations may restrict the shipment of a portion of a specified grade

or size of a variety. Under such a limitation, the quantity of such

grade or size that may be shipped by a handler during a particular week

is established as a percentage of the total shipments of such variety

by such handler in a prior period, established by the committee and

approved by the Secretary, in which the handler shipped such variety.

Section 905.153 of the regulations provides procedures for limiting

the volume of small red seedless grapefruit entering the fresh market.

The procedures specify that the committee

[[Page 50420]]

may recommend that only a certain percentage of sizes 48 and/or 56 red

seedless grapefruit be made available for shipment into fresh market

channels for any week or weeks during the regulatory period. The

regulation period is 11 weeks long and begins the third Monday in

September. Under such a limitation, the quantity of sizes 48 and/or 56

red seedless grapefruit that may be shipped by a handler during a

regulated week is calculated using the recommended percentage. By

taking the recommended weekly percentage times the average weekly

volume of red grapefruit handled by such handler in the previous five

seasons, handlers can calculate the volume of sizes 48 and/or 56 they

may ship in a regulated week.

This rule limits the volume of small red seedless grapefruit that

can enter the fresh market for each week of the 11 week period

beginning the week of September 20, 1999. This rule establishes the

weekly percentage for the first two weeks (September 20 through October

3) at 45 percent; for the third week (October 4 through October 10) at

40 percent; for the fourth through seventh weeks (October 11 through

November 7) at 37 percent; and for the last four weeks (November 8

through December 5) at 32 percent. This is a change in the percentages

originally recommended by the committee. On April 6, 1999, the

committee unanimously voted to establish a weekly percentage of 25

percent for each of the 11 weeks. The committee's initial

recommendation was issued as a proposed rule published on August 26,

1999 (64 FR 46603). No comments were received during the comment period

which expired on September 10, 1999. The committee subsequently met on

August 31, 1999, and unanimously recommended adjusting the proposed

percentages.

This action is similar to actions taken in the previous two seasons

(1997-98 and 1998-99). Prior to those two years, there were no weekly

percentages established. During the three seasons prior to

implementation of weekly percentage regulations (1994-95, 1995-96, and

1996-97), returns for red seedless grapefruit had been declining, often

not returning the cost of production. On-tree prices for red seedless

grapefruit had fallen steadily from $9.60 per carton (\4/5\ bushel)

during the 1989-90 season, to $3.45 per carton during the 1994-95

season, to a low of $1.41 per carton during the 1996-97 season.

The committee determined that one problem contributing to the

market's condition was the excessive number of small sized grapefruit

shipped early in the marketing season. In the 1994-95, 1995-96, and

1996-97 seasons, sizes 48 and 56 accounted for 34 percent of total

shipments during the 11 week regulatory period, with the average weekly

percentage exceeding 40 percent of shipments. This contrasts with sizes

48 and 56 representing only 26 percent of total shipments for the

remainder of the season. While there is a market for early grapefruit,

the shipment of large quantities of small red seedless grapefruit in a

short period oversupplies the fresh market for these sizes and

negatively impacts the market for all sizes.

For the majority of the season, larger sizes return higher prices

than smaller sizes. However, there is a push early in the season to get

fruit into the market to take advantage of the high prices available at

the beginning of the season. The early season crop tends to have a

greater percentage of small sizes. This creates a glut of smaller,

lower priced fruit on the market, driving down the price for all sizes.

Early in the season, larger sized fruit commands a premium price. In

some cases, the f.o.b. price is $4 to $6 a carton more than for the

smaller sizes. In early October, the f.o.b. price for a size 27

averages around $10.00 per carton. This compares to an average f.o.b.

price of $5.50 per carton for size 56. By the end of the 11 week period

covered in this rule, the f.o.b. price for large sizes drops to within

$2 of the f.o.b. price for small sizes.

In the three seasons prior to 1997-98, prices of red seedless

grapefruit fell from a weighted average f.o.b. price of $7.80 per

carton to an average f.o.b. price of $5.50 per carton during the period

covered by this rule. Even though later in the season the crop sized to

naturally limit the amount of smaller sizes available for shipment, the

price structure in the market had already been negatively affected.

During those three seasons, the market did not recover, and the f.o.b.

price for all sizes fell to around $5.00 to $6.00 per carton for most

of the rest of the season.

The committee believes that the over shipment of smaller sized red

seedless grapefruit early in the season contributes to below production

cost returns for growers and lower on-tree values. An economic study

done by the University of Florida--Institute of Food and Agricultural

Sciences (UF-IFAS) in May 1997, found that on-tree prices had fallen

from a high near $7.00 per carton in 1991-92 to around $1.50 per carton

for the 1996-97 season. The study projected that if the industry

elected to make no changes, the on-tree price would remain around $1.50

per carton. The study also indicated that increasing minimum size

restrictions could help raise returns.

To address this issue, the committee voted to utilize the

provisions of Sec. 905.153, and establish a weekly percentage of size

regulation during the first 11 weeks of the 1997-98 and 1998-99

seasons. The initial recommendations from the committee were to set the

weekly percentage at 25 percent for each of the 11 weeks. As more

information on the crop became available, and as the season progressed,

the committee met and adjusted its recommendations for the weekly

percentages. The committee considered information from past seasons,

crop estimates, fruit size, and other information to make its

recommendations. The committee has since used this regulation to the

betterment of the industry. Prices have increased, and movement has

been more stable. Actual weekly percentages established during the 11

week period during the 1997-98 season were 50 percent for the first 3

weeks, and 35 percent for the other 8 weeks. Actual weekly percentages

established during the 11 week period during the 1998-99 season were 37

percent for the first 3 weeks, and 32 percent for the other 8 weeks.

In making its recommendation for the upcoming season, the committee

reviewed its experiences in past seasons. The committee believes

establishing weekly percentages during the last two seasons was

successful. The committee examined shipment data covering the 11 week

regulatory period for the last two regulated seasons and the three

prior seasons. The information contained the amounts and percentages of

sizes 48 and 56 shipped during each week and weekly f.o.b. price

figures. During the 11 week period, the regulations were successful at

helping maintain prices at a higher level than previously, and sizes 48

and 56 by count and as a percentage of total shipments were reduced.

During the first 11 weeks of the 1996-97 season, shipments of sizes 48

and 56 were 3,076,474 cartons, or 40 percent of total shipments. In the

first 11 weeks of the last two seasons, under regulation, shipments of

sizes 48 and 56 averaged 2,517,080 cartons and accounted for 33 percent

of total shipments.

In comparison with f.o.b. prices from the 1996-97 season, for weeks

when pricing information was available (weeks 6 through 11), last

season's numbers were higher in five of the six weeks. The average

f.o.b. prices for these weeks were $6.28 for the 1996-97 season, $6.55

for the 1997-98 season, and $7.63 for the 1998-99 season. Total

[[Page 50421]]

fresh shipments for the 1998-99 season are estimated at 27.5 million

cartons of red grapefruit.

The committee was concerned that the glut of smaller, lower priced

fruit on the early market was driving down the price for all sizes.

There was a steep decline in prices for larger sizes in previous

seasons. During the six weeks from mid-October through November, prices

for sizes 23, 27, 32, and 36 fell by 28, 27, 21, and 20 percent,

respectively, during the 1996-97 season, the last season prior to

establishing percentage size regulations. Prices for the same sizes

fell only 13, 11, 14, and 11 percent, respectively, during the same

period last season with regulation. In fact, prices for all sizes were

firmer during this period last season when compared to the 1996-97

season, with the weighted average price dropping only 11 percent during

this period as compared to 22 percent during the 1996-97 season.

An economic study done by Florida Citrus Mutual (Lakeland, Florida)

in April 1998, found that the weekly percentage regulation had been

effective. The study stated that part of the strength in early season

pricing appeared to be due to the use of the weekly percentage rule to

limit the volume of sizes 48 and 56. It said that prices were generally

higher across the size spectrum with sizes 48 and 56 having the largest

gains, and larger sized grapefruit registering modest improvements. The

rule shifted the size distribution toward the higher priced, larger

sized grapefruit which helped raise weekly average f.o.b. prices. It

further stated that sizes 48 and 56 grapefruit accounted for around 27

percent of domestic shipments during the same 11 weeks during the 1996-

97 season. Comparatively, sizes 48 and 56 accounted for only 17 percent

of domestic shipments during the same period in 1997-98, as small sizes

were used to supply export customers with preferences for small sized

grapefruit.

The committee initially recommended that the weekly percentage of

size regulation be set at 25 percent for each week during the

regulatory period. Members believed that the problems associated with

an uncontrolled volume of small sizes entering the market early in the

season would recur without such action. The committee thought that to

provide the most flexibility, the weekly percentage should be set at 25

percent for each of the 11 weeks in the regulated period. The committee

believes it is best to set regulation at the most restrictive level,

and then relax the percentage as warranted by conditions later in the

season. The committee's intent was to meet again early in the season to

consider adjustments in the weekly percentage rates, as was done in the

previous two seasons.

In its discussion, the committee recognized the need for and the

benefits of the weekly percentage regulation. The committee recommended

establishing the base percentage at 25 percent for each of the

regulation weeks. This is as restrictive as Sec. 905.153 will allow.

In making its initial recommendation, the committee considered that

by establishing regulation at 25 percent, they could meet again in

August and subsequent months and use the best information available to

help the industry and the committee make the most informed decisions as

to whether the established percentages are appropriate.

Based on this information and the experiences from past seasons,

the committee agreed to establish the initial weekly percentages at the

most restrictive level. They could then meet in late August, or in

September and October, as needed, when additional information is

available, and determine whether the set percentage levels are

appropriate. They said this is essentially what was done in the prior

two years, and it had been very successful. For example, the committee

met in May 1998, and recommended a weekly percentage of 25 percent for

each of the first 11 weeks of the 1998-99 season. In September, the

committee met again, and recommended that the weekly percentage be

relaxed. They met again in October, and did not recommend any further

relaxation. Any changes to the weekly percentages established by this

rule would require additional rulemaking and the approval of the

Secretary.

The committee noted that more information helpful in determining

the appropriate weekly percentages would be available after August. At

the time of the April meeting, grapefruit had not yet begun to size,

giving little indication as to the distribution of sizes. Only the most

preliminary of crop estimates was available, with the official estimate

not to be issued until October.

The committee met again on August 31, 1999, and revisited the

weekly percentage issue and reviewed information it had acquired since

its April 6, 1999, meeting. At the meeting, the committee unanimously

recommended that the weekly percentages be changed from 25 percent for

each of the 11 regulated weeks to 45 percent for the first two weeks

(September 20 through October 3); 40 percent for the third week

(October 4 through October 10); 37 percent for the fourth through

seventh weeks (October 11 through November 7); and 32 percent for the

last four weeks (November 8 through December 5).

In its discussion of these changes, the committee reviewed the

initial percentages recommended and the current state of the crop. The

committee also reexamined shipping information from past seasons,

looking particularly at volume across the 11 weeks. Based on this

review, the committee agreed that maintaining the weekly percentage at

25 percent would be too restrictive.

During deliberations in past seasons as to weekly percentages, the

committee considered how past shipments had affected the market. Based

on available statistical information, the committee members believed

that once shipments of sizes 48 and 56 reach levels above 250,000

cartons a week, prices declined on those and most other sizes of red

seedless grapefruit. The committee believed that if shipments of small

sizes could be maintained at around 250,000 cartons a week, prices

should stabilize and demand for larger, more profitable sizes should

increase.

As is the case for this season, they wanted to recommend a weekly

percentage that would provide a sufficient volume of small sizes

without adversely impacting the markets for larger sizes. They also

originally recommended that the percentage for each of the 11 weeks be

established at the 25 percent level. This percentage, when combined

with the average weekly shipments for the total industry, provided a

total industry allotment that would approach the 250,000 carton mark

during regulated weeks without exceeding it.

While the committee did eventually vote last season to increase the

weekly percentages, shipments of sizes 48 and 56 during the 11 weeks

regulated during the 1998-99 season were lower by count and by

percentage than in the unregulated seasons of 1994-95 through 1996-97.

This may have contributed to the success of the regulation.

In setting the weekly percentage for each week at 25 percent this

season, the total available allotment would approximate 234,000 cartons

(25 percent of the total industry base of 937,257 cartons). The

committee thus believed the percentages should be increased, as was

done last year. While satisfied with the level of regulation last

season (37 percent for the first 7 weeks and 32 percent for the last 4

weeks), the committee believes that the unique circumstances this

season warrant more liberal percentages during the first 3 weeks of the

1999-2000 season.

[[Page 50422]]

While the official crop estimate will not be available until

October, there are indications that the grapefruit crop will be lower

than last year. The committee projects fresh shipments of red seedless

grapefruit to be equal to or below levels in previous seasons. The

quality of this year's crop is anticipated to be normal or above

normal. However, the shape of the fruit is expected to be below normal.

All growing districts appear to be affected by poorly shaped fruit,

which could reduce the packout percentages for the 1999-2000 crop. The

smaller sizes will most likely be the better shaped fruit during the

first part of the season, which supports allowing ample shipments of

the smaller sizes.

The individual fruit size for the upcoming crop is projected to be

a little smaller than normal, but not as small as last season. However,

if the rain currently being received in the production area does not

continue for the next 10 to 20 days, the crop will cease sizing. This

would put pressure on the industry to ship more of the smaller sizes.

Additionally, the lack of rain during much of the growing has

delayed maturity of the crop and early shipments are anticipated to be

below levels in previous seasons. Unusual weather patterns in the past

eight months has resulted in multiple blooms in most groves in Florida.

The problem with multiple blooms is that it is difficult for fruit

harvesters to determine which of the fruit is mature. This could cause

a higher percentage of smaller sizes to be harvested early in the

season, because the small fruit tends to mature earlier. Therefore, the

committee recommended a higher percentage in the first three weeks of

the season than in later weeks.

The situation is also complicated by the ongoing economic problems

affecting the European and Asian markets. In past seasons, the European

market has shown a strong demand for the smaller sized red seedless

grapefruit. The reduction in shipments to these areas experienced

during the recent years is expected to continue during the upcoming

season. This reduction in demand could result in a greater amount of

small sizes for remaining markets to absorb. These factors increase the

need for restrictions to prevent the volume of small sizes from

overwhelming all markets.

Therefore, this rule establishes the weekly percentage at 45

percent for the first two weeks of the regulatory period (September 20

through October 3); 40 percent for the third week (October 4 through

October 10); 37 percent for the fourth through seventh weeks (October

11 through November 7); and 32 percent for the last four weeks

(November 8 through December 5).

The committee again included in its deliberations that if crop and

market conditions should change, the committee could recommend that the

percentages be increased or eliminated to provide for the shipment of

more small sizes in any or all of the 11 weeks.

Under Sec. 905.153, the quantity of sizes 48 and/or 56 red seedless

grapefruit that may be shipped by a handler during a regulated week

will be calculated using the recommended percentage of 45, 40, 37 or 32

percent, depending on the regulated week. By taking the weekly

percentage times the average weekly volume of red grapefruit handled by

such handler in the previous five seasons, handlers can calculate the

volume of sizes 48 and/or 56 they may ship in a regulated week.

An average week has been calculated by the committee for each

handler using the following formula. The total red seedless grapefruit

shipments by a handler during the 33 week period beginning the third

Monday in September and ending the first Sunday in May during the

previous five seasons are added and divided by five to establish an

average season. This average season is then divided by the 33 weeks to

derive the average week. This average week is the base for each handler

for each of the 11 weeks of the regulatory period. The weekly

percentage, in this case 45, 40, 31 or 32 percent, is multiplied by a

handler's average week. The product is that handler's allotment of

sizes 48 and/or 56 red seedless grapefruit for the given week.

Under this rule, the calculated allotment is the amount of small

sized red seedless grapefruit a handler may ship. If the minimum size

established under Sec. 905.52 remains at size 56, handlers can fill

their allotment with size 56, size 48, or a combination of the two

sizes such that the total of these shipments are within the established

limits. If the minimum size under the order is 48, handlers can fill

their allotment with size 48 fruit such that the total of these

shipments is within the established limits. The committee staff will

perform the specified calculations and provide them to each handler.

To illustrate, suppose Handler A shipped a total of 50,000 cartons,

64,600 cartons, 45,000 cartons, 79,500 cartons, and 24,900 cartons of

red seedless grapefruit in the last five seasons, respectively. Adding

these season totals and dividing by five yields an average season of

52,800 cartons. The average season is then divided by 33 weeks to yield

an average week, in this case, 1,600 cartons. This is Handler A's base.

For the first week of the regulatory period, the weekly percentage of

45 percent is then applied to this amount. This provides this handler

with a weekly allotment of 720 cartons (1,600 X .45) of size 48 and/or

56. Similar calculations, using the appropriate weekly percentage, will

be performed for the remaining 10 weeks of regulation.

The average week for handlers with less than five previous seasons

of shipments is calculated by the committee by averaging the total

shipments for the seasons they did ship red seedless grapefruit during

the immediately preceding five years and dividing that average by 33.

New handlers with no record of shipments have no prior period on which

to base their average week. Such new handlers can ship small sizes

equal to a 45, 40, 37, or 32 percent of their total volume of shipments

during their first shipping week (depending on when they begin

shipping). Once a new handler has established shipments, their average

week will be calculated as an average of the weeks they have shipped

during the current season.

This rule establishes a weekly percentage of 45 percent for the

first two weeks (September 20 through October 3); 40 percent for the

third week (October 4 through October 10); 37 percent for the fourth

through seventh weeks (October 11 through November 7); and 32 percent

for the last four weeks (November 8 through December 5). The regulatory

period begins the third Monday in September. Each regulation week

begins Monday at 12:00 a.m. and ends at 11:59 p.m. the following

Sunday, since most handlers keep records based on Monday being the

beginning of the work week. If necessary, the committee could meet and

recommend a different percentage for any given week or weeks of the

regulatory period. Any such recommendation would require approval of

the Secretary.

The rules and regulations contain a variety of provisions designed

to provide handlers with some marketing flexibility. When a regulation

is established by the Secretary for a given week, the committee

calculates the quantity of small red seedless grapefruit which may be

handled by each handler. Section 905.153(d) provides allowances for

overshipments, loans, and transfers of allotment. These allowances

should allow handlers the opportunity to supply their markets while

limiting the impact of small sizes on a weekly basis.

[[Page 50423]]

During any week for which the Secretary has fixed the percentage of

sizes 48 and/or 56 red seedless grapefruit, any handler can handle an

amount of sizes 48 and/or 56 red seedless grapefruit not to exceed 110

percent of their allotment for that week. The quantity of overshipments

(the amount shipped in excess of a handler's weekly allotment) is

deducted from the handler's allotment for the following week.

Overshipments are not allowed during week 11 because there will be no

allotments the following week from which to deduct the overshipments.

If handlers fail to use their entire allotments in a given week,

the amounts undershipped are not carried forward to the following week.

However, a handler to whom an allotment has been issued can lend or

transfer all or part of such allotment (excluding the overshipment

allowance) to another handler. In the event of a loan, each party must,

prior to the completion of the loan agreement, notify the committee of

the proposed loan and date of repayment. If a transfer of allotment is

desired, each party will promptly notify the committee so that proper

adjustments of the records can be made. In each case, the committee

confirms in writing all such transactions prior to the following week.

The committee can also act on behalf of handlers wanting to arrange

allotment loans or participate in the transfer of allotment. Repayment

of an allotment loan is at the discretion of the handlers party to the

loan.

The committee computes each handler's allotment by multiplying the

handler's average week by the percentage established by regulation for

that week. The committee will notify each handler prior to that

particular week of the quantity of sizes 48 and 56 red seedless

grapefruit such handler can handle during a particular week, making the

necessary adjustments for overshipments and loan repayments.

The committee chose to use the past five seasons to provide the

most accurate picture of an average season. When recommending

procedures for establishing weekly percentage of size regulation for

red seedless grapefruit, the committee discussed several methods of

measuring a handler's volume to determine this base. It was decided

that shipments for the five previous years and for the 33 weeks

beginning the third Monday in September to the first Sunday the

following May should be used for calculation purposes.

This bases allotment on a 33 week period of shipments, not just a

handler's early shipments. This was done specifically to accommodate

small shippers or light volume shippers, who may not have shipped many

grapefruit in the early season. The use of an average week based on 33

weeks also helps adjust for variations in growing conditions that may

affect when fruit matures in different seasons and growing areas. After

considering different ways to calculate the average week, the committee

settled on this definition of prior period as the method that provides

each handler with an equitable base from which to establish shipments.

The procedures under which this rule is established provide

flexibility through several different options. Handlers can transfer,

borrow or loan allotment based on their needs in a given week. Handlers

also have the option of over shipping their allotment by 10 percent in

a week, as long as the overshipment is deducted from the following

week's shipments. Statistics show that in none of the regulated weeks

in past seasons was the total available allotment used. Approximately

190 loans and transfers were utilized last season. To facilitate this

process, the committee staff provides a list of handler names and

telephone numbers to help handlers find possible sources of allotment

if needed for loan or trade. Also, this regulation only restricts

shipments of small sized red grapefruit. There are no volume

restrictions on larger sizes.

After considering the available information, the committee

determined that this rule is needed to regulate shipments of small red

seedless grapefruit during the 1999-2000 season.

This rule does not affect the provision that handlers may ship up

to 15 standard packed cartons (12 bushels) of fruit per day exempt from

regulatory requirements. Fruit shipped in gift packages that are

individually addressed and not for resale, and fruit shipped for animal

feed are also exempt from handling requirements under specific

conditions. Also, fruit shipped to commercial processors for conversion

into canned or frozen products or into a beverage base are not subject

to the handling requirements under the order.

Section 8e of the Act requires that whenever grade, size, quality,

or maturity requirements are in effect for certain commodities under a

domestic marketing order, including grapefruit, imports of that

commodity must meet the same or comparable requirements. This rule does

not change the minimum grade and size requirements under the order,

only the percentages of sizes 48 and/or 56 red grapefruit that may be

handled. Therefore, no change is necessary in the grapefruit import

regulations as a result of this action.

Pursuant to requirements set forth in the Regulatory Flexibility

Act (RFA), AMS has considered the economic impact of this action on

small entities. Accordingly, 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 approximately 80 grapefruit handlers subject to

regulation under the order and approximately 11,000 growers of citrus

in the regulated area. Small agricultural service firms, which includes

handlers, have been defined by the Small Business Administration (SBA)

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

agricultural producers are defined as those having annual receipts of

less than $500,000 (13 CFR 121.601).

Based on industry and committee data, the average annual f.o.b.

price for fresh Florida red grapefruit during the 1998-99 season was

around $7.20 per 4/5 bushel carton, and total fresh shipments for the

1998-99 season are estimated at 14.6 million cartons of red grapefruit.

Approximately 20 percent of all handlers handled 60 percent of Florida

grapefruit shipments. In addition, many of these handlers ship other

citrus fruit and products which are not included in committee data but

would contribute further to handler receipts. Using the average f.o.b.

price, about 80 percent of grapefruit handlers could be considered

small businesses under SBA's definition, and about 20 percent of the

handlers could be considered large businesses. The majority of Florida

grapefruit handlers and growers may be classified as small entities.

Under the authority of Sec. 905.52 of the order, this rule limits

the volume of small red seedless grapefruit that can enter the fresh

market during the first 11 weeks of the 1999-2000 season, beginning the

third Monday in September. This rule utilizes the provisions of

Sec. 905.153. This rule establishes a weekly percentage of 45 percent

for the first two weeks of the regulatory period (September 20 through

October 3); 40 percent for the third week (October 4 through October

10); 37 percent for the fourth through

[[Page 50424]]

seventh weeks (October 11 through November 7); and 32 percent for the

last four weeks (November 8 through December 5). This is a change from

the committee's original recommendation of a 25 percent weekly

percentage for each of the 11 weeks. Under this limitation, the

quantity of sizes 48 and/or 56 red seedless grapefruit that may be

shipped by a handler during a particular week is calculated using the

established percentage.

By taking the established percentage times the average weekly

volume of red grapefruit handled by such handler in the previous five

seasons, the committee calculates a handler's weekly allotment of small

sizes. This rule sets the weekly percentage at 45, 40, 37 or 32 percent

for each of the 11 weeks in the regulatory period. This rule should

provide a supply of small sized red seedless grapefruit sufficient to

meet market demand, without saturating all markets with these small

sizes. This rule is needed to help stabilize the market and improve

grower returns during the early part of the season.

The weekly percentage of 25 percent, when combined with the average

weekly shipments for the total industry, would have provided a total

industry allotment of nearly 235,000 cartons of sizes 48 and/or 56 red

seedless grapefruit per regulated week. If a 25 percent restriction on

small sizes had been applied during the 11 week period in the three

seasons prior to the 1997-98 season, an average of 4.2 percent of

overall shipments during that period would have been affected. This

rule will affect even fewer shipments by establishing less restrictive

weekly percentages. In addition, a large percentage of this volume most

likely could have been replaced by larger sizes. Under this rule, a

sufficient volume of small sized red grapefruit will be allowed into

all channels of trade, and allowances will be in place to help handlers

address any market shortfall. Therefore, the overall impact on total

seasonal shipments and on industry costs should be minimal.

The early season crop tends to have a greater percentage of small

sizes. This creates a glut of smaller, lower priced fruit, driving down

the price for all sizes. Early in the season, larger sized fruit

commands a premium price. In some cases, the f.o.b. price is $4 to $6 a

carton more than for the smaller sizes. In early October, the f.o.b.

price for a size 27 averages around $10.00 per carton. This compares to

an average f.o.b. price of $5.50 per carton for size 56. By the end of

the 11 week period covered in this rule, the f.o.b. price for large

sizes typically drops to within $2 of the f.o.b. price for small sizes.

The overshipment of smaller sized red seedless grapefruit early in

the season has contributed to below production cost returns for growers

and lower on tree values. An economic study done by the University of

Florida--Institute of Food and Agricultural Sciences (UF-IFAS) in May

1997, found that on tree prices had fallen from a high near $7.00 per

carton in 1991-92 to around $1.50 per carton for the 1996-97 season.

The study projected that if the industry elected to make no changes,

the on tree price would remain around $1.50 per carton. The study also

indicated that increasing minimum size restrictions could help raise

returns.

This regulation will have a positive impact on affected entities.

The purpose of this rule is to help stabilize the market and improve

grower returns by limiting the volume of small sizes marketed early in

the season. There are no volume restrictions on larger sizes.

Therefore, larger sizes could be substituted for smaller sizes with a

minimal effect on overall shipments. While this rule may necessitate

spot picking, which could entail slightly higher harvesting costs, many

in the industry are already using the practice. In addition, because

this regulation is only in effect for part of the season, the overall

effect on costs is minimal. This rule is not expected to appreciably

increase costs to producers.

This rule will help limit the effects of an over supply of small

sizes early in the season. Similar rules were enacted successfully the

last two seasons. During the 11 week period, the regulations were

successful in helping maintain prices at a higher level than in prior

seasons, and sizes 48 and 56 by count and as a percentage of total

shipments were reduced. Therefore, this action should have a positive

impact on grower returns.

For the weeks when pricing information was available, last season's

prices were higher in five of the six weeks when compared with f.o.b.

prices from the 1996-97 season. The average f.o.b. for these weeks was

$6.28 for the 1996-97 season, $6.55 for the 1997-98 season and $7.63

for the 1998-99 season.

The rules were also successful in reducing the steep drop in prices

for larger sizes that had occurred in previous seasons. During the six

weeks from mid-October through November, prices for sizes 23, 27, 32,

and 36 fell by 25, 25, 20, and 14 percent, respectively, during the

1997-98 season. Prices for the same sizes fell only 13, 11, 14, and 11

percent, respectively, during the same period last season with

regulation. Prices for all sizes were firmer during this period last

season when compared to the 1996-97 season, with the weighted average

price dropping only 11 percent during this period last season as

compared to 22 percent during the 1996-97 season.

An economic study done by Florida Citrus Mutual (Lakeland, Florida)

in April 1998, found that the weekly percentage regulation had been

effective. The study indicated that part of the strength in early

season pricing appeared to be due to the use of the weekly percentage

rule to limit the volume of sizes 48 and 56. Prices were generally

higher across the size spectrum, with sizes 48 and 56 having the

largest gains and larger sized grapefruit registering modest

improvements.

The report also stated that sizes 48 and 56 grapefruit accounted

for around 27 percent of domestic shipments during the 11 weeks during

the 1996-97 season, compared to only 17 percent during the 1997-98

season, as small sizes were used to supply export customers with

preferences for small sized grapefruit.

Over 50 percent of red seedless grapefruit are shipped to the fresh

market. Because of reduced demand and an oversupply, the processing

outlet is not currently profitable. Consequently, it is essential that

the market for fresh red grapefruit be fostered and maintained. Any

costs associated with this action would only be for the 11 week

regulatory period. However, benefits from this action could stretch

throughout the entire 33 week season.

This rule is intended to stabilize the market during the early

season and increase grower returns. Information available from the last

two seasons suggests the regulation could do both. A stabilized price

that returns a fair market value would be beneficial to both small and

large growers and handlers. The opportunities and benefits of this rule

are expected to be available to all red seedless grapefruit handlers

and growers regardless of their size of operation. Accordingly, this

action would provide the most beneficial results for the industry given

any other alternatives.

Handlers utilizing the flexibility of the loan and transfer aspects

of this action will be required to submit a form to the committee. The

rule will increase the reporting burden on approximately 80 handlers of

red seedless grapefruit who will be taking about 0.03 hour to complete

each report regarding allotment loans or transfers. The information

collection requirements

[[Page 50425]]

contained in this section have been approved by the Office of

Management and Budget (OMB) under the provisions of the Paperwork

Reduction Act of 1995 (44 U.S.C. Chapter 35) and assigned OMB number

0581-0094. As with all Federal marketing order programs, reports and

forms are periodically reviewed to reduce information requirements and

duplication by industry and public sectors. The Department has not

identified any relevant Federal rules that duplicate, overlap or

conflict with this rule. However, red seedless grapefruit must meet the

requirements as specified in the U.S. Standards for Grades of Florida

Grapefruit (7 CFR 51.760 through 51.784) issued under the Agricultural

Marketing Act of 1946 (7 U.S.C. 1621 through 1627).

The committee's meetings were widely publicized throughout the

citrus industry and all interested persons were invited to attend the

meetings and participate in committee deliberations on all issues. Like

all committee meetings, the April 6, 1999, and August 31, 1999,

meetings were public meetings and all entities, both large and small,

were able to express views on this issue. Interested persons are

invited to submit information on the regulatory and informational

impacts of this action on small businesses.

A proposed rule concerning this action was published in the Federal

Register on Thursday, August 26, 1999 (64 FR 46603). Copies of the rule

were mailed or sent via facsimile to all committee members and to

grapefruit growers and handlers. The rule was also made available

through the Internet by the Office of the Federal Register, the

Department and the committee.

A 15-day comment period was provided to allow interested persons to

respond to the proposal. The comment period ended September 10, 1999.

No comments were received.

As previously stated, subsequent to the issuance of the proposed

rule, the committee met and recommended modifying its original

recommendation. The committee recommended that the weekly percentages

be changed from 25 percent for each of the 11 regulated weeks to 45

percent for the first two weeks (September 20 through October 3); 40

percent for the third week (October 4 through October 10); 37 percent

for the fourth through seventh weeks (October 11 through November 7);

and 32 percent for the last four weeks (November 8 through December 5).

Because of this recommendation, the Department has determined that

interested parties should be provided the opportunity to comment on the

changes to the original recommendations. However, the Department has

further determined that extending the comment period with no

percentages in effect limiting the shipment of small red seedless

grapefruit when the period of regulation begins would be detrimental to

the industry. Therefore, the Department is instituting the regulations

on small red seedless grapefruit through this interim final rule that

allows 10 additional days to comment.

After consideration of all relevant matter presented, including the

information and recommendations 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.

A 10-day comment period is provided to allow interested persons to

respond to this interim final rule. Ten days is deemed appropriate

because the regulation period begins on September 20, 1999, and

continues for 11 weeks. Adequate time will be necessary so that any

changes made to the regulations based on comments filed could be made

effective during the 11-week period. All written comments timely

received will be considered before a final determination is made on

this matter.

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

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

interest to give preliminary notice prior to putting this rule into

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

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

because this rule needs to be in place when the regulatory period

begins on September 20, 1999, and handlers begin shipping grapefruit.

The committee has kept the industry well informed on this issue. It has

also been widely discussed at various industry and association

meetings. Interested persons have had time to determine and express

their positions. In addition, these size small red grapefruit are

already being harvested and handlers need to know the amount they will

be allowed to ship in order to determine harvesting quantities that

will allow these increased amounts to be shipped. This rule is

necessary to help stabilize the market and improve grower returns.

Further, handlers are aware of this rule, which was recommended at

public meetings. Also, a 15-day comment period was provided for in the

proposed rule and a 10-day comment period is provided in this rule.

List of Subjects in 7 CFR Part 905

Grapefruit, Marketing agreements, Oranges, Reporting and

recordkeeping requirements, Tangelos, Tangerines.

For the reasons set forth in the preamble, 7 CFR part 905 is

amended as follows:

PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN

FLORIDA

1. The authority citation for 7 CFR part 905 continues to read as

follows:

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

2. Section 905.350 is revised to read as follows:

Sec. 905.350 Red seedless grapefruit regulation.

This section establishes the weekly percentages to be used to

calculate each handler's weekly allotment of small sizes. If the

minimum size in effect under Sec. 905.306 for red seedless grapefruit

is size 56, handlers can fill their allotment with size 56, size 48, or

a combination of the two sizes such that the total of these shipments

are within the established weekly limits. If the minimum size in effect

under Sec. 905.306 for red seedless grapefruit is 48, handlers can fill

their allotment with size 48 red seedless grapefruit such that the

total of these shipments is within the established weekly limits. The

weekly percentages for sizes 48 and/or 56 red seedless grapefruit grown

in Florida, which may be handled during the specified weeks are as

follows:

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

Weekly

Week percentage

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

(a) 9/20/99 through 9/26/99................................. 45

(b) 9/27/99 through 10/3/99................................. 45

(c) 10/4/99 through 10/10/99................................ 40

(d) 10/11/99 through 10/17/99............................... 37

(e) 10/18/99 through 10/24/99............................... 37

(f) 10/25/99 through 10/31/99............................... 37

(g) 11/1/99 through 11/7/99................................. 37

(h) 11/8/99 through 11/14/99................................ 32

(i) 11/15/99 through 11/21/99............................... 32

(j) 11/22/99 through 11/28/99............................... 32

(k) 11/29/99 through 12/5/99................................ 32

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

Dated: September 13, 1999.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 99-24238 Filed 9-16-99; 8:45 am]

BILLING CODE 3410-02-P