Raisins Produced From Grapes Grown in California; Final Free and Reserve Percentages for 1998-99 Zante Currant Raisins

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV99-989-3 IFR]

Raisins Produced From Grapes Grown in California; Final Free and

Reserve Percentages for 1998-99 Zante Currant Raisins

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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

SUMMARY: This rule establishes final volume regulation percentages for

1998-99 Zante Currant raisins covered under the Federal marketing order

for California raisins (order). The order regulates the handling of

raisins produced from grapes grown in California and is administered

locally by the Raisin Administrative Committee (Committee). The volume

regulation percentages are 85 percent free and 15 percent reserve. Free

tonnage raisins may be sold by handlers to any market. Reserve raisins

must be held in a pool for the account of the Committee and are

disposed of through various programs authorized under the order. The

volume regulation percentages are intended to help the industry manage

its supply of Zante Currant raisins and strengthen market conditions.

DATES: Effective: March 9, 1999. Comments received by May 7, 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. 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: Maureen T. Pello, Marketing

Specialist, California Marketing Field Office, Fruit and Vegetable

Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno,

California 93721; telephone: (559) 487-5901, Fax: (559) 487-5906; 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, or Fax:

(202) 720-5698. Small businesses may request information on complying

with this regulation, or obtain a guide on complying with fruit,

vegetable, and specialty crop marketing agreements and orders by

contacting Jay Guerber, Marketing Order Administration Branch, Fruit

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

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

5698, or E-mail: Jay__N__G[email protected]. You may view the marketing

agreement and order small business compliance guide at the following

web site: http://www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing

Agreement and Order No. 989 (7 CFR part 989), both as amended,

regulating the handling of raisins produced from grapes grown in

California, hereinafter referred to as the ``order.'' The 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 rule has been reviewed under Executive Order 12988, Civil

Justice Reform. Under the order provisions now in effect, final free

and reserve percentages may be established for raisins acquired by

handlers during the crop year. This rule establishes final free and

reserve percentages for Zante Currant raisins for the 1998-99 crop

year, which began August 1, 1998, and ends July 31, 1999. 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 in equity to review the

Secretary's ruling on the petition, provided an action is filed not

later than 20 days after the date of the entry of the ruling.

This rule establishes final volume regulation percentages for 1998-

99 crop Zante Currant raisins covered under the order. The volume

regulation percentages are 85 percent free and 15 percent reserve. Free

tonnage raisins may be sold by handlers to any market. Reserve raisins

must be held in a pool for the account of the Committee and are

disposed of through various programs authorized under the order. For

example, reserve raisins may be sold by the Committee to handlers for

free use or to replace part of the free tonnage raisins they exported;

used in diversion programs; carried over as a hedge against a short

crop the following year; or disposed of in other outlets not

competitive with those for free tonnage raisins, such as government

purchase, distilleries, or animal feed. The volume regulation

percentages are intended to help the industry manage its supply of

Zante Currant raisins and strengthen market conditions. Final

percentages were recommended by the Committee at a meeting on February

11, 1999.

Section 989.54 of the order prescribes the procedures and time

frames to be followed in establishing volume regulation. This includes

methodology used to calculate percentages. Pursuant to Sec. 989.54(a)

of the order, the Committee met on August 13, 1998, to review shipment

and inventory data, and other matters relating to the

[[Page 10920]]

supplies of raisins of all varietal types. The Committee computed a

trade demand for each varietal type for which a free tonnage percentage

might be recommended. Trade demand is computed using a formula

specified in the order and, for each varietal type, is equal to 90

percent of the prior year's shipments of free tonnage and reserve

tonnage raisins sold for free use into all market outlets, adjusted by

subtracting the carryin on August 1 of the current crop year and by

adding the desirable carryout at the end of that crop year. As

specified in Sec. 989.154, the desirable carryout for each varietal

type is equal to the shipments of free tonnage raisins of the prior

crop year during the months of August, September, and one-half of

October. In accordance with these provisions, the Committee computed

and announced a 1998-99 trade demand for Zante Currant raisins at 3,215

tons as shown below.

Computed Trade Demand

[Natural condition tons]

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

Zante

Currant

raisins

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

Prior year's shipments...................................... 4,121

Multiplied by 90 percent.................................... 0.90

Equals adjusted base........................................ 3,709

Minus carryin inventory..................................... 1,188

Plus desirable carryout..................................... 694

Equals computed trade demand................................ 3,215

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

Section 989.54(b) of the order requires that the Committee

announce, on or before October 5, preliminary crop estimates and

determine whether volume regulation is warranted for the varietal types

for which it computed a trade demand. That section allows the Committee

to extend the October 5 date up to 5 business days if warranted by a

late crop.

The 1998-99 crop was unusually late because of the combined effect

of adverse crop conditions during the spring of 1998 created by the

weather phenomenon known as El Nino, scattered rain during the fall

harvest, and a shortage of labor once the grapes were ready for

harvest. The crop is normally harvested during late August and early

September; this season's crop was harvested about 3-4 weeks later.

Because of the late crop, the Committee met on October 8, 1998, and

announced preliminary crop estimates for all nine varietal types of

raisins covered under the order. To guard against an underestimation of

the crop, the Committee computed preliminary volume regulation

percentages for five of the nine varietal types of raisins covered

under the order--Dipped Seedless, Natural (sun-dried) Seedless

(Naturals), Oleate and Related Seedless, Other Seedless, and Zante

Currant raisins. The total crop was initially estimated at 321,486

tons.

As more information became available during the following months,

the Committee determined that volume regulation was only warranted for

Zante Currant raisins. The other varietal types of raisins for which

preliminary percentages were computed are produced from grapes that

mature later than Zante Currants, and thus the crop sizes for these

varietal types were more adversely affected by the poor weather

conditions and labor problems. The Committee ultimately determined that

the supplies of these other varietal types would be less than or close

to their computed trade demands, and that volume regulation percentages

were not needed. Based on the most recent information available, the

total crop estimate was reduced from 321,486 to 276,510 tons. This is

the first time in 16 years that volume regulation was not implemented

for Naturals, the major varietal type of California raisin (crop

estimate reduced from 280,092 to 235,000 tons, about 35 percent lower

than the 10-year average of 360,183 tons). As in past seasons, the

Committee submitted its marketing policy to the Department for review.

Regarding Zante Currant raisins, the Committee announced its

preliminary crop estimate at its October 1998 meeting at 3,684 tons. As

indicated in the preceding paragraph, Zante Currants mature earlier

than the other varietal types of raisins covered under the order. Thus,

producers were able to harvest their Zante Currants before it rained in

the production area and before labor was in short supply. With the

preliminary crop estimate (3,684 tons), 1997-98 carryin inventory

(1,188 tons), and reserve raisins released for free use through an

export program (483 tons) totaling to a supply of 5,355 tons, about 66

percent higher than trade demand (3,215 tons), and the 1997-98 carryin

inventory (1,188 tons) about 71 percent higher than the desirable

inventory (694 tons), the Committee determined that volume regulation

for Zante Currant raisins was warranted.

At the October meeting, the Committee also computed preliminary

free and reserve percentages for Zante Currants which released 65

percent of the computed trade demand since the field price had not been

established. The preliminary percentages were 57 percent free and 43

percent reserve. These percentages were modified to release 85 percent

of the trade demand on October 16, 1998 when the Zante Currant field

price was established. The Zante Currant preliminary percentages were

thus modified to 74 percent free and 26 percent reserve. The Committee

met on November 13, 1998, and announced interim percentages for Zante

Currant raisins at 85 percent free and 15 percent reserve which, based

on the 3,684 ton crop estimate, released less than the computed trade

demand. On January 15, 1999, the Committee revised its crop estimate

for Zante Currants from 3,684 to 3,801 tons.

Various programs to utilize reserve Zante Currant raisins were

implemented when volume regulation was in effect during the 1994-95,

1995-96, and 1997-98 seasons to help reduce inventories, and help

strengthen total producer prices (which includes proceeds from both

free tonnage plus reserve pool Zante Currants) from $412.56 per ton in

1994-95 to an estimated high of $730 per ton in 1997-98. The Committee

is implementing a reserve program this year which is expected to help

the industry export more Zante Currants, thereby reducing the

industry's oversupply, helping to build export markets, and ultimately

improving producer returns.

Without such programs, the Committee estimates that its export

shipments would be reduced, thereby reducing overall Zante Currant

shipments for the crop year. Reduced shipments for the current year

would create a high carryin inventory which would result in a lower

computed trade demand for next year, a lower free tonnage percentage,

should volume regulation be implemented, and likely reduced returns to

1999-2000 crop raisin producers. The implementation of volume

regulation for 1998-99 Zante Currant raisins is expected to help manage

supply and strengthen market conditions.

As required under Sec. 989.54(d) of the order, the Committee

recommended to the Secretary at its meeting on February 11, 1999, final

free and reserve percentages for Zante Currant raisins which, when

applied to the final production estimate, will tend to release the full

trade demand for Zante Currants. With the increased crop estimate of

3,801 tons, final percentages computed to the same figures as the

interim percentages--85 percent free and 15 percent reserve. The

Committee's calculations to arrive at final percentages are shown in

the table below.

[[Page 10921]]

Final Volume Regulation Percentages

[Tonnage as natural condition weight]

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

Zante

Currant

raisins

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

Trade demand................................................. 3,215

Divided by crop estimate..................................... 3,801

Equals free percentage....................................... 85

100 minus free percentage equals reserve percentage.......... 15

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

In addition, the Department's ``Guidelines for Fruit, Vegetable,

and Speciality Crop Marketing Orders'' (Guidelines) specify that 110

percent of recent years' sales should be made available to primary

markets each season for marketing orders utilizing reserve pool

authority. This goal will be met for Zante Currants by the

establishment of final percentages which release 100 percent of the

trade demand and the offer of additional reserve raisins for sale to

handlers under the ``10 plus 10 offers.'' As specified in

Sec. 989.54(g), the 10 plus 10 offers are two offers of reserve pool

raisins which are made available to handlers during each season.

Handlers may sell their 10 plus 10 raisins to any market. For each such

offer, a quantity of reserve raisins equal to 10 percent of the prior

year's shipments is made available for free use.

About 824 tons of raisins will be made available in the 10 plus 10

offers (which includes 423 tons of remaining 1997 reserve Zante

Currants), or 412 tons per offer. Both offers will be held

simultaneously in March 1999. Adding the 824 tons of 10 plus 10 raisins

to the 3,215 ton trade demand figure, plus 1,188 tons of 1997-98

carryin inventory equates to about 5,227 tons natural condition raisins

or 4,645 tons packed raisins that will be made available for free use,

or to the primary market. This is 127 percent of the quantity of Zante

Currants shipped in 1997 (4,121 tons natural condition tons or 3,662

packed tons).

In addition to the 10 plus 10 offers, Sec. 989.67(j) of the order

provides authority for sales of reserve raisins to handlers under

certain conditions such as a national emergency, crop failure, change

in economic or marketing conditions, or if free tonnage shipments in

the current crop year exceed shipments of a comparable period of the

prior crop year. Such reserve raisins may be sold by handlers to any

market. These additional offers of reserve raisins would thus make even

more raisins available to primary markets which is consistent with the

Department's Guidelines.

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, 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 20 handlers of California raisins who are

subject to regulation under the order and approximately 4,500 raisin

producers in the regulated area. Almost all of the 20 handlers handled,

and about 130 of the 4,500 raisin producers produced Zante Currants

during the 1998-99 crop year. Small agricultural service firms have

been defined by the Small Business Administration (13 CFR 121.601) 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. No more than 7 handlers, and a majority of

producers, of California raisins may be classified as small entities.

Thirteen of the 20 handlers subject to regulation have annual sales

estimated to be at least $5,000,000, and the remaining 7 handlers have

sales less than $5,000,000, excluding receipts from any other sources.

Pursuant to Sec. 989.54(d) of the order, this rule establishes

final volume regulation percentages for 1998-99 crop Zante Currant

raisins. The volume regulation percentages are 85 percent free and 15

percent reserve. Free tonnage raisins may be sold by handlers to any

market. Reserve raisins must be held in a pool for the account of the

Committee and are disposed of through certain programs authorized under

the order. Volume regulation is warranted for Zante Currants this

season because the crop estimate of 3,801 tons combined with the 1997-

98 carryin inventory of 1,188 tons, plus 483 tons of reserve raisins

released for free use through an export program, results in a supply of

5,472 tons which exceeds the trade demand of 3,215 tons by about 70

percent. The volume regulation percentages are intended to help the

industry manage its supply of Zante Currant raisins and strengthen

market conditions.

Many years of marketing experience led to the development of the

current volume regulation procedures. These procedures have helped the

industry address its marketing problems by keeping supplies in balance

with domestic and export market needs, and strengthening market

conditions. The current volume regulation procedures fully supply the

domestic and export markets, provide for market expansion, and help

prevent oversupplies in the domestic market.

The free and reserve percentages established by this rule release

the full trade demand and apply uniformly to all handlers in the

industry, regardless of size. With the exception of the 1996-97 season,

small and large Zante Currant raisin producers and handlers have been

operating under volume regulation percentages every year since 1994-95.

There are no known additional costs incurred by small handlers that are

not incurred by large handlers. All handlers are regulated based on the

quantity of raisins which they acquire from producers. While the level

of benefits of this rulemaking are difficult to quantify, the

stabilizing effects of volume regulation impact both small and large

handlers positively by helping them maintain orderly marketing

conditions by managing supply.

Various programs to utilize reserve Zante Currant raisins were

implemented when volume regulation was in effect during the 1994-95,

1995-96, and 1997-98 seasons. As shown in the table following this

paragraph, although production varied during those years, volume

regulation helped to reduce inventories, and helped to strengthen total

producer prices (which includes proceeds from both free tonnage plus

reserve pool Zante Currants) from $412.56 per ton in 1994-95 to an

estimated high of $730 per ton in 1997-98. The Committee is

implementing a reserve program this year which is expected to help the

industry export more Zante Currants, thereby reducing the industry's

oversupply, helping to build export markets, and ultimately improving

producer returns.

[[Page 10922]]

Zante Currant Inventories and Producer Prices During Years of Volume Regulation

[*Natural condition tons]

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

Inventory* Total season

-------------------------------- average

Crop Year Production* producer

Desirable Physical prices (per

ton)

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

1994-95......................................... 5,377 837 4,364 $412.56

1995-96......................................... 3,294 782 2,890 711.32

1996-97......................................... 4,491 987 549 \1\ 1,150.00

1997-98......................................... 4,826 694 1,188 730.00

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

\1\ No volume regulation.

Free and reserve percentages are established by variety, and only

in years when the supply exceeds the trade demand by a large enough

margin that the Committee believes volume regulation is necessary to

maintain market stability. Accordingly, in assessing whether to apply

volume regulation or, as an alternative, not to apply such regulation,

the Committee recommended that volume regulation was only warranted for

Zante Currant raisins this season. Preliminary volume regulation

percentages were computed and announced in October 1998 for four other

varietal types of California raisins. As more information became

available in the following months, the Committee determined that the

supplies of these other varietal types would be less than or close to

their computed trade demands; thus, the Committee determined that

volume regulation was not warranted.

There are some reporting, recordkeeping and other compliance

requirements under the order. The reporting and recordkeeping burdens

are necessary for compliance purposes and for developing statistical

data for maintenance of the program. The requirements are the same as

those applied last season. Thus, this action will not impose any

additional reporting or recordkeeping burdens on either small or large

handlers. The forms require information which is readily available from

handler records and which can be provided without data processing

equipment or trained statistical staff. The information and

recordkeeping requirements have been previously approved by the Office

of Management and Budget (OMB) under OMB Control No. 0581-0178. As with

other, similar marketing order programs, reports and forms are

periodically studied to reduce or eliminate duplicate information

collection burdens by industry and public sector agencies.

In addition, the Department has not identified any relevant Federal

rules that duplicate, overlap, or conflict with this rule. Finally,

interested persons are invited to submit information on the regulatory

and informational impacts of this action on small businesses.

Further, Committee and subcommittee meetings are widely publicized

in advance and are held in a location central to the production area.

The meetings are open to all industry members, including small business

entities, and other interested persons who are encouraged to

participate in the deliberations and voice their opinions on topics

under discussion. Thus, Committee recommendations can be considered to

represent the interests of small business entities in the industry.

After consideration of all relevant material presented, including

the Committee's recommendation, and other information, it is found that

this interim final rule, as hereinafter set forth, will tend to

effectuate the declared policy of the Act.

This rule invites comments for a 60-day period on the establishment

of final volume regulation percentages for 1998-99 crop Zante Currant

raisins covered under the order. All comments received within the

comment period will be considered prior to finalization of this rule.

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: (1) The relevant provisions of this part require that

the percentages designated herein for the 1998-99 crop year apply to

all Zante Currant raisins acquired from the beginning of that crop

year; (2) handlers are currently marketing 1998-99 crop Zante Currant

raisins and this action should be taken promptly to achieve the

intended purpose of making the full trade demand available to handlers;

(3) handlers are aware of this action, which the Committee unanimously

recommended at an open meeting, and need no additional time to comply

with these percentages; and (4) this interim final rule provides a 60-

day comment period and any comments received will be considered prior

to finalization of this rule.

List of Subjects in 7 CFR Part 989

Grapes, Marketing agreements, Raisins, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, 7 CFR part 989 is

amended to read as follows:

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

1. The authority citation for 7 CFR part 989 continues to read as

follows:

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

2. Section 989.252 is added to Subpart--Supplementary Regulations

to read as follows:

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

Regulations.

Sec. 989.252 Final free and reserve percentages for the 1998-99 crop

year.

The final percentages for standard Zante Currant raisins acquired

by handlers during the crop year beginning on August 1, 1998, which

shall be free tonnage and reserve tonnage, respectively, are designated

as follows:

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

Free Reserve

Varietal type percentage percentage

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

Zante Currant................................... 85 15

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

Dated: March 2, 1999.

Robert C. Keeney,

Deputy Administrator, Fruit and Vegetable Programs.

[FR Doc. 99-5551 Filed 3-5-99; 8:45 am]

BILLING CODE 3410-02-P