Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2000-2001 Marketing Year

Federal RegisterDec 13, 1999

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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV-00-985-1 PR]

Marketing Order Regulating the Handling of Spearmint Oil Produced

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

2000-2001 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This 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 2000-2001 marketing year, which begins

on June 1, 2000. This rule invites comments on the establishment of

salable quantities and allotment percentages for Class 1 (Scotch)

spearmint oil of 1,211,207 pounds and 65 percent, respectively, and for

Class 3 (Native) spearmint oil of 1,033,648 pounds and 50 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 January 12, 2000.

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, 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

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 George Kelhart, Technical Advisor, 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.

Small businesses may request information on complying with this

regulation by contacting Jay Guerber, Marketing Order Administration

Branch, Fruit and Vegetable Programs, AMS, USDA, P.O. Box 96456, room

2525-S, Washington, DC 20090-6456; telephone (202) 720-2491, Fax: (202)

720-5698, or E-mail: Jay.G[email protected].

SUPPLEMENTARY INFORMATION: This proposal 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

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conformance with Executive Order 12866.

This proposal 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 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 2000-2001 marketing year, which begins on June 1,

2000. 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 the authority in sections 985.50, 985.51, and 985.52 of

the order, the Committee recommended the salable quantities and

allotment percentages for the 2000-2001 marketing year at its October

6, 1999, meeting. With 7 members in favor and 1 member opposed, the

Committee recommended the establishment of a salable quantity and

allotment percentage for Class 1 (Scotch) spearmint oil of 1,211,207

pounds and 65 percent, respectively. The member in opposition favored

the establishment of a lower salable quantity and allotment percentage.

The Committee unanimously recommended the establishment of a salable

quantity and allotment percentage for Class 3 (Native) spearmint oil of

1,033,648 pounds and 50 percent, respectively.

This proposed rule would limit the amount of spearmint oil that

handlers may purchase from, or handle for, producers during the 2000-

2001 marketing year, which begins on June 1, 2000. 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 currently accounts

for approximately 63 percent of the annual U.S. production of Scotch

spearmint oil and approximately 93 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 72 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. The Far

West's market share as a percent of total world sales fell to a low of

about 38 percent during the 1994-95 season. Beginning with the 1996-97

marketing year, the Committee has employed a marketing strategy for

Scotch spearmint oil that is intended to foster market stability and

that would retain and expand market share. Using this approach, the Far

West's market share has increased to approximately 43 percent of total

world sales. The Committee's current 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 more of

the Far West's historical share of the global market.

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 generally stabilized between

$10.50 and $11.50 per pound. During the past year, however, the price

of Native spearmint oil has decreased about $2.00 per pound despite the

Committee's efforts to balance available supplies with the demand for

the oil. Based on comments made at the Committee's meeting, factors

contributing to the low price could include the relatively poor returns

being realized from other essential oils, as well as the overall weak

farm situation.

With approximately 90 percent of the U.S. production located in the

Far West, and with nearly 80 percent of total world sales originating

in the Far West, the Committee's method of calculating the Native

spearmint oil salable quantity and allotment percentage continues to

primarily utilize 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 2000-2001 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 l, 2000-869,206 pounds. This figure

is derived by subtracting the estimated 1999-2000 marketing year trade

demand of 887,500 pounds from the revised 1999-2000 marketing year

total available supply of 1,756,706 pounds.

(B) Estimated global sales for the 1999-2000 marketing year--

2,082,500 pounds. This figure is based on preliminary information the

Committee has compiled.

900,000 pounds.

(D) Approximate Far West percentage of estimated total world sales

in 1999-2000--43 percent. This is down from the 1980 level of

approximately 72 percent, but up from the low of approximately 38

percent during the 1994/95 marketing year.

(E) Total estimated allotment base for the 2000-2001 marketing

year--1,863,396 pounds. This figure represents a one percent increase

over the revised 1999-2000 allotment base.

(F) Recommended 2000-2001 allotment percentage--65 percent. This

figure is based upon recommendations made at the October 6, 1999,

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

meetings held during September 1999.

(G) The Committee's computed 2000-2001 salable quantity--1,211,207

pounds. This figure is the product of the recommended allotment

percentage and the total estimated allotment base.

(H) Estimated available supply for the 2000-2001 marketing year--

2,080,413 pounds. This figure is derived by adding the computed salable

quantity to the estimated June 1, 2000, carry-in volume, and represents

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

market during the 2000-2001 marketing year.

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

the 2000-2001 marketing year--887,500 pounds. This figure is based upon

estimates provided to the Committee by buyers of spearmint oil.

(J) Estimated carry-out on May 31, 2001--1,192,913 pounds. This

figure is the difference between the 2000-2001 estimated trade demand

and the 2000-2001 estimated available supply.

(2) Class 3 (Native) Spearmint Oil

(A) Estimated carry-in on June 1, 2000--64,602 pounds. This figure

is the difference between the estimated 1999-2000 marketing year trade

demand of 1,168,474 pounds and the revised 1999-2000 marketing year

total available supply of 1,233,076 pounds.

(B) Estimated trade demand (domestic and export) for the 2000-2001

marketing year--1,170,974 pounds. This figure is based on the average

of the estimates provided at the four production area meetings held in

September 1999.

1,106,372 pounds. This figure is the difference between the estimated

2000-2001 marketing year trade demand and the estimated carry-in on

June 1, 2000.

(D) Total estimated allotment base for the 2000-2001 marketing

year--2,067,296 pounds. This figure represents a one percent increase

over the revised 1999-2000 allotment base.

(E) Computed allotment percentage--53.5 percent. This percentage is

computed by dividing the required salable quantity by the total

estimated allotment base.

(F) Recommended allotment percentage--50 percent. This is the

Committee's recommendation based on the computed allotment percentage

and takes into account the recent sharp decline in the Native spearmint

oil price.

(G) The Committee's recommended salable quantity--1,033,648 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 1,211,207 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 1,106,372 pounds

and allotment percentage of 50 percent are based on the anticipated

supply and trade demand during the 2000-2001 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 2000-2001 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 2000-

2001 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 2000-

2001 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 7 spearmint oil handlers subject to regulation under the

order, and approximately 119 producers of Class 1 (Scotch) spearmint

oil and approximately 105 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 7 handlers regulated by the order could 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

25 of the 119 Scotch spearmint oil producers and 7 of the 105 Native

spearmint oil producers could 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

[[Page 69424]]

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 2000-2001 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 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.