[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14741]


[[Page Unknown]]

[Federal Register: June 17, 1994]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 1250

RIN 0581-AB32
[Docket No. PY-94-002]

 

Amendment to Egg Research and Promotion Order To Increase the 
Rate of Assessment

AGENCY: Agricultural Marketing Service.

ACTION: Proposed Rule.

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SUMMARY: This proposed rule would amend the Egg Research and Promotion 
Order to increase the assessment rate from 5 cents to 10 cents per 30-
dozen case of commercial eggs. The increase is authorized by amendments 
to the Egg Research and Consumer Information Act must be approved by 
egg producers voting in a referendum. This proposal would also make a 
conforming amendment to regulations.

DATES: Comments must be received on or before August 16, 1994.

ADDRESSES: Written comments are to be mailed to Janice L. Lockard, 
Chief, Standardization Branch, Poultry Division, AMS, USDA, Room 3944-
South, P.O. Box 96456, Washington, DC. 20090-6456. Comments received 
may be inspected at this location between 8 a.m. and 4:30 p.m., Monday 
through Friday, except holidays. State that your comments refer to 
Docket No. PY-94-002.

FOR FURTHER INFORMATION CONTACT:

Janice L. Lockard, 202-720-3506.

SUPPLEMENTARY INFORMATION:

Executive Orders 12866 and 12778

    This rule has been determined not-significant for purposes of 
Executive Order 12866, and has been reviewed by the Office of 
Management and Budget.
    This proposed rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. It is not intended to have retroactive effect. 
This rule would 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 14 of the Act, a 
person subject to an order may file a petition with the Secretary 
stating that such order, any provisions of such order or any 
obligations imposed in connection with such order are not in accordance 
with law; and requesting a modification of the order or an exemption 
therefrom. Such person is afforded the opportunity for a hearing on the 
petition. After a hearing, the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which such person is an inhabitant, or has his principal 
place of business, has jurisdiction to review the Secretary's ruling on 
the petition, if a complaint is filed within 20 days after date of the 
entry of the ruling.

Effect on Small Entities

    The Administrator of the Agricultural Marketing Service has 
determined that this proposed rule will not have a significant economic 
impact on a substantial number of small entities, as defined by the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
    Currently, 618 egg producers pay assessments to the American Egg 
Board (AEB). A proposed rule to increase the exemption level from 
30,000 to 75,000 laying hens was published in the Federal Register on 
March 22, 1994 (59 FR 13460). The increased exemption level would 
exempt 253 small egg producers who represent 41 percent of the egg 
producers currently paying assessments, but only 4 percent of AEB's 
total assessment income. It is anticipated that the 75,000-hen 
exemption level would be in place before the referendum on the 
assessment rate increase. Therefore, a change in the assessment rate 
would affect only egg producers owning more than 75,000 laying hens.
    There are an estimated 365 producers who own more than 75,000 hens. 
Currently, egg producers must pay a mandatory assessment of 5 cents per 
30-dozen case of eggs marketed to fund the research and promotion 
activities authorized by the Act. The present 5-cent assessment is 
equivalent to approximately 0.231 percent of the wholesale price of a 
1-dozen carton of Large eggs. An assessment rate of 10 cents per 30-
dozen case would be equivalent to approximately 0.463 percent of the 
wholesale price of a1-dozen carton of Large eggs. This is based on the 
Economic Research Service's 3-year average wholesale price for New York 
City Grade A Large cartoned eggs (1991-93) of 72 cents per dozen. AEB 
collects approximately $7.5 million annually from the 5-cent 
assessment, and it is estimated that it would collect $14 million for a 
10-cent assessment. It is estimated that any additional costs would be 
offset by the benefits to be derived from strengthened research and 
promotion programs.

Paperwork Reduction

    Information collection requirements and recordkeeping provisions 
contained in 7 CFR Part 1250 have been previously approved by the 
Office of Management and Budget and assigned OMB Control No. 0581-0093 
under the Paperwork Reduction Act of 1980.
    No additional recordkeeping requirements would be imposed as a 
result of this proposed rule.

Background and Proposed Changes

    On December 14, 1993, the Egg Research and Consumer Information Act 
(7 U.S.C. 2711) was amended (Pub. L. 103-188) to increase the maximum 
rate of assessment, raise the exemption level, and provide for research 
project funding.
    Under the amended section 8 of the Act, the maximum rate of 
assessment was raised from 10 cents to 20 cents per case of commercial 
eggs. The actual assessment rate is prescribed by the Egg Research and 
Promotion Order and is currently 5 cents per case. Producers owning 
30,000 or fewer laying hens are exempt from paying assessments and 
other provisions of the Act. Section 12 of the Act was amended to 
increase the exemption level to 75,000 or fewer hens. A proposed rule 
to raise the exemption level in the Order was published in the Federal 
Register on March 22, 1994. The new exemption level will become 
effective after publication of the final rule.
    The Act amendments provide that AEB may recommend an increase in 
the assessment rate to the Secretary. The recommendation must be based 
on a scientific study, marketing analysis, or other evidence 
demonstrating a need for the increase. Consequently, AEB conducted a 
marketing analysis and evaluated the advertising and nutrition research 
programs.

Advertising

    AEB began its first advertising campaign in 1977. For the next 3 
years, media expenditures averaged $3.5 million annually. In 1980, the 
American Association of Advertising Agencies noted that, during that 3-
year period, per capita consumption of eggs had increased and consumer 
attitudes toward eggs had improved.
    Considering inflation, an estimated $9 million would be required 
for AEB to conduct a media program in 1994 comparable to that in 1977. 
Further, because consumers have grown more concerned with a variety of 
issues affecting egg consumption, an even greater level of funding 
would be needed to achieve the same results today.
    AEB's analysis establishes that egg consumption has been steadily 
declining over many years. In fact, USDA statistics show that per 
capita consumption dropped from 402 in 1945 to 234 in 1993. In general, 
the decline is attributed to fewer egg-consuming households and less 
frequent egg consumption.
    Eggs face certain barriers in the marketplace which have 
contributed to the declining consumption. Considered by consumers to be 
primarily a breakfast food, eggs must compete with a variety of 
breakfast alternatives: cold cereal; pancakes and waffles; rolls, 
muffins, and toast; and hot cereal. The total measured media spending 
for the breakfast food category was $937 million in 1993. Egg industry 
advertising-including that funded by AEB, State and regional 
associations, and companies promoting name brands-represents only 0.7 
percent of that amount.
    In addition, consumer concerns with fat and cholesterol have 
significantly affected consumer eating habits. The judgment that eggs 
are high in cholesterol has further contributed to consumers using 
fewer eggs. Overcoming negative consumer attitudes is even more 
difficult when other breakfast foods are more heavily promoted.
    AEB's current advertising strategy is three-fold: (1) Educate 
consumers about eggs and cholesterol by providing facts on egg 
cholesterol in a healthy diet; (2) remind consumers how much they love 
the great taste of eggs; and (3) connect eggs with the rich, 
pleasurable associations people have with eggs and egg-eating 
occasions.
    The current ``I Love Eggs'' advertising campaign based on this 
strategy proved effective in consumer testing. Prior to being exposed 
to the advertising, 43 percent of consumers tested had extremely 
positive or very positive attitudes about eggs. This number increased 
by 13 percent after consumers were exposed to the advertising. Further, 
almost half of the consumers tested reported an increased likelihood of 
eating and serving eggs more often.
    With current funding, AEB has earmarked about $2.8 million for this 
campaign in 1995. This budget supports 15-second television commercials 
and 30-second radio spots. A 5-cent increase in the assessment rate 
would allow for an advertising budget of $7.5 million. This budget 
would enable the use of more effective 30-second television spots; 
allow advertising to be aired almost every other week, as opposed to 
the 10 weeks per year now; and provide for over 1,000 additional 
commercial announcements. Most significantly, an additional one million 
target households would be reached by AEB advertising each week.

Nutrition Research

    The nutrition portion of AEB's budget encompasses two programs of 
importance both for the egg industry and the consuming public-nutrition 
research and nutrition education.
    In recent years, an increased amount of the AEB budget has been 
used for research to evaluate the effects of dietary cholesterol on 
plasma lipids. Since 1991, $1.3 million has funded research projects at 
various universities, all of which have focused on this issue. For 
example, a recently completed study was published in the April issue of 
the American Heart Association's ``Arteriosclerosis and Thrombosis'' 
journal. The results of this study found that blood cholesterol levels 
in young healthy men did not significantly increase when they were fed 
1 or 2 eggs per day. Additional funding would allow the egg industry to 
study the same effects across other population groups.
    Increased funding also would allow AEB to expand its contacts with 
scientists, health professionals, and the media in developing nutrition 
materials, sponsoring scientific symposiums and related forums, and 
compiling research data.

AEB Recommendation

    At the March 17, 1994, Board meeting in Chicago, Illinois, AEB 
members voted unanimously to recommend that the assessment rate be 
increased from 5 cents to 10 cents per 30-dozen case of commercial 
eggs. Their decision was based on the marketing analysis as well as an 
overall sense from producers nationwide that more funds are necessary 
to help improve the position of the industry's products in the 
marketplace through strengthened advertising and research programs. AEB 
further requested that a referendum on this increase be held as soon as 
possible.

Referendum

    After an opportunity for public comment, a referendum will be held 
among egg producers not exempt from the Act. Producers engaged in the 
production of commercial eggs during a representative period determined 
by the Secretary will be eligible to vote on the assessment rate change 
proposed by AEB.
    All known eligible egg producers will receive information in the 
mail regarding the referendum. It is anticipated that the 75,000-hen 
exemption level will be in place before the referendum.
    The increase in the assessment rate shall become effective if the 
change is approved or favored by not less than two-thirds of the 
producers voting in the referendum, or a majority of such producers if 
they represent not less than two-thirds of the commercial eggs produced 
by those voting.

List of Subjects in 7 CFR Part 1250

    Administrative practice and procedure, Advertising, Agricultural 
research, Eggs and egg products, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble 7 CFR Part 1250 is 
proposed to be amended as follows:

PART 1250--EGG RESEARCH AND PROMOTION

    1. The authority citation of Part 1250 is revised to read as 
follows:

    Authority: 7 U.S.C. 2701-2718.

    2. Section 1250.347 is revised to read as follows:


Sec. 1250.347  Assessments.

    Each handler designated in Sec. 1250.349 and pursuant to 
regulations issued by the Board shall collect from each producer, 
except for those producers specifically exempted in Sec. 1250.348, and 
shall pay to the Board at such times and in such manner as prescribed 
by regulations issued by the Board an assessment at a rate of not to 
exceed 10 cents per 30-dozen case of eggs, or the equivalent thereof, 
for such expenses and expenditures, including provisions for a 
reasonable reserve and those administrative costs incurred by the 
Department of Agriculture after this subpart is effective, as the 
Secretary finds are reasonable and likely to be incurred by the Board 
and the Secretary under this subpart, except that no more than one such 
assessment shall be made on any case of eggs.
    3. In section 1250.514, the first sentence is revised to read as 
follows:


Sec. 1250.514  Levy of assessments.

    An assessment rate of 10 cents per case of commercial eggs is 
levied on each case of commercial eggs handled for the account of each 
producer. * * *

    Dated: June 9, 1994.
L. P. Massaro,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 94-14741 Filed 6-16-94; 8:45 am]
BILLING CODE 3410-02-P