[Federal Register Volume 60, Number 150 (Friday, August 4, 1995)]
[Rules and Regulations]
[Pages 39837-39840]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-19323]



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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV95-989-3FR]


Raisins Produced From Grapes Grown in California; Change of 
Desirable Carryout Used in Computing Trade Demand

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This final rule changes the desirable carryout levels which 
are used in computing the yearly trade demand for California raisins. 
The trade demand is used to help determine the volume regulation 
percentages for each crop year, if necessary. The desirable carryout is 
being reduced from the current two and one-half months of shipments to 
two and one-fourth months of shipments during the 1995-96 crop year and 
to two months of shipments in subsequent crop years. The Raisin 
Administrative Committee (Committee), which is responsible for local 
administration of the Federal marketing order, believes that the 
current desirable carryout level has contributed to excessive supplies 
of marketable tonnage early in the crop year. This rule is expected to 
moderate the oversupply of California raisins early in the crop year, 
thus stabilizing the market conditions for producers and handlers.
EFFECTIVE DATE: August 4, 1995.

FOR FURTHER INFORMATION CONTACT: Mark Hessel, Marketing Specialist, 
California Marketing Field Office, Fruit and Vegetable Division, AMS, 
USDA, 2202 Monterey Street, suite 102B, Fresno, California 93721; 
telephone: (209) 487-5901, or fax (209) 487-5906; or Valerie L. Emmer, 
Marketing Specialist, Marketing Order Administration Branch, Fruit and 
Vegetable Division, AMS, USDA, room 2523-S, P.O. Box 96456, Washington, 
DC 20090-6456; telephone: (202) 205-2829, or fax (202) 720-5698.


[[Page 39838]]

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Agreement and Order No. 989 (7 CFR Part 989), as amended, regulating 
the handling of raisins produced from grapes grown in California, 
hereinafter referred to as the ``order.'' This order is effective under 
the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 
601-674), hereinafter referred to as the ``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This final rule has been reviewed under Executive Order 12778, 
Civil Justice Reform. This rule will reduce the desirable carryout for 
the 1995-96 crop year, beginning August 1, 1995, through July 31, 1996, 
and for subsequent crop years. 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 a bill in equity is filed 
not later than 20 days after the date of the entry of the ruling.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Administrator of the Agricultural Marketing Service 
(AMS) has considered the economic impact of this action on small 
entities.
    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 marketing order and approximately 4,500 
producers in the regulated area. Small agricultural service firms have 
been defined by the Small Business Administration (13 CFR 121.601) as 
those whose annual receipts (from all sources) are less than 
$5,000,000, and small agricultural producers are defined as those 
having annual receipts of less than $500,000. No more than eight 
handlers and a majority of producers of California raisins may be 
classified as small entities. Twelve of the 20 handlers subject to 
regulation have annual sales estimated to be at least $5,000,000, and 
the remaining eight handlers have sales less than $5,000,000, excluding 
receipts from any other sources.
    This final rule changes section 989.154 of the administrative rules 
and regulations of the raisin marketing order. The Committee 
recommended by a vote of 31 to 15 at its April 28, 1995, meeting, to 
adjust the desirable carryout level in section 989.154 from the current 
two and one-half months of shipments to two and one-fourth months of 
shipments during the 1995-96 crop year and to two months of shipments 
in subsequent crop years. The crop year includes the 12-month period 
August 1 through July 31.
    The desirable carryout level is the amount of tonnage from the 
prior crop year needed during the first part of the succeeding crop 
year to meet market needs, before new crop raisins are harvested and 
available for market. Currently, section 989.154 provides that the 
desirable carryout levels shall be equal to the shipments of free 
tonnage to all outlets for each varietal type during the months of 
August, September, and one-half of the total shipments for the month of 
October of the prior crop year.
    The desirable carryout figure is used in marketing policy 
calculations to determine trade demand. The trade demand is 90 percent 
of prior year's shipments, adjusted by the carryin and desirable 
carryout. The trade demand is then used to help determine the volume 
regulation percentages for each crop year, if necessary.
    Beginning in the 1991-92 crop year the desirable carryout was 
reduced from three months of shipments to two and one-half months of 
shipments. It was determined that the use of the three month desirable 
carryout level resulted in excessive supplies of marketable tonnage 
early in the season.
    The Committee has used the two and one-half month desirable 
carryout figure for four crop years and has determined that the use of 
this figure has also contributed to an excessive supply of free tonnage 
at the beginning of the marketing season. A majority of the Committee 
members believe that this causes unstable market conditions during the 
early part of the crop year.
    To moderate the oversupply of marketable raisin tonnage early in 
the season, the Committee recommended that the desirable carryout 
levels be revised from two and one-half months of the prior year's 
shipments to two and one-fourth months of the prior year's shipments 
for the 1995-96 crop year and to two months of the prior year's 
shipments for subsequent crop years.
    The change in the desirable carryout levels reduces the trade 
demand and the free tonnage percentage, and makes less free tonnage 
available to handlers for immediate use. However, handlers will still 
be provided an opportunity to increase their inventories, if necessary, 
by purchasing raisins from the reserve pool under order-mandated 10 
plus 10 offers during November and other releases of reserve pool 
raisins available under the marketing order. The 10 plus 10 offers are 
two simultaneous offers of reserve pool raisins which are made 
available to handlers each season. For each such offer, a quantity of 
raisins equal to 10 percent of the prior year's shipments is made 
available for free use. Although this final rule tends to tighten the 
supply of raisins early in the season, handlers will still have the 
opportunity to obtain additional supplies to increase their carryouts 
from the 10 plus 10 offers.
    This rule is intended to stabilize the early season raisin market. 
Bringing early season supplies more in line with market needs is 
expected to stabilize market prices. This price stabilization should 
make raisin buyers less likely to postpone their purchases. Thus, 
decreasing the desirable carryout could strengthen the market and 
increase shipments, which would benefit raisin producers and handlers.
    One alternative that was discussed by the Committee prior to 
recommending the change was to immediately set the desirable carryout 
level at two months of the prior year's shipments. It was determined 
that this was too rapid an adjustment and that first setting the 
desirable carryout levels at two and one-quarter months for the 1995-96 
season and two months in subsequent crop years would be a more prudent 
approach.
    Another alternative considered was setting the desirable carryout 
at a fixed tonnage. However, this alternative does not allow the 
desirable carryout to fluctuate with changing market conditions from 
year to year.
    Those voting in opposition to the recommendation to reduce the 
desirable 

[[Page 39839]]
carryout level believed that the marketing order should not further 
restrict supplies during the early part of the crop year. However, the 
following table shows that adequate supplies of Natural (sun-dried) 
Seedless raisins have been available early in the crop year to meet 
demand. Natural (sun-dried) Seedless raisins represent about 90 percent 
of all raisins produced in California. The other two varieties which 
had reserve pools for the 1994-95 crop year, Zante Currant raisins and 
Other Seedless raisins, had carryins far exceeding the annual trade 
demand. ``Carryin'' is synonymous with the ``carryout'' of the 
preceding crop year. All figures are in natural condition tons.

------------------------------------------------------------------------
                                          Desirable                     
                                           carryin                      
                                         (Aug, Sept  Physical   Aug/Sept
               Crop year                   & \1/2\    carryin  shipments
                                             Oct                        
                                         shipments)                     
------------------------------------------------------------------------
1994-95................................      84,671    92,248    64,374 
1993-94................................      81,867    93,752    67,784 
1992-93................................      82,591   115,440    65,495 
1991-92................................      84,541   109,306    65,613 
------------------------------------------------------------------------

    The desirable carryin is set to meet the demand for the early part 
of the crop year (August and September) before the new crop becomes 
available. The actual physical carryin has far exceeded the desirable 
carryin and has resulted in an oversupply of free tonnage during the 
early part of the crop year. The reduction in desirable carryout 
contributes to correcting the problem by adjusting the free tonnage 
market supply, which brings it more in line with demand.
    The desirable carryout levels that are established by this rule 
apply uniformly to all handlers in the industry, whether small or 
large, and there will be no known additional costs incurred by small 
handlers. The stabilizing effects of the revised desirable carryout 
levels impact both small and large handlers positively by helping them 
maintain and expand markets.
    In the event that the prior year's shipments are limited because of 
crop conditions, a proviso in section 989.154 allows the committee to 
select the total shipments during the months of August, September and 
one-half of the total shipments for October during one of the three 
years preceding the prior crop year. Consistent with the need to reduce 
early season supplies, this rule makes a corresponding revision to this 
proviso, by changing the total shipments from August, September, and 
one-half of the total shipments for October to the total shipments from 
August and September only.
    The proposed rule concerning this action was published in the June 
21, 1995, Federal Register (60 FR 32280), with a 15-day comment period 
ending July 6, 1995. Four comments were received, three in favor and 
the other in opposition to the proposed rule.
    The three comments in favor of the proposed rule were submitted by 
Mr. Vaughn Koligian, General Manager of the Raisin Bargaining 
Association (RBA) and a raisin grower; Mr. Gerald Chooljian of Del Rey 
Packing, a raisin handler and grower; and Mr. Ernest A. Bedrosian of 
National Raisin Company and EKK Bedrosian Farms, a raisin handler and 
grower. The RBA represents approximately 2,000 raisin growers. Mr. 
Koligian further stated that 15 raisin packers, including Mr. Chooljian 
and Mr. Bedrosian, support the change in the desirable carryout level 
as set forth in the proposed rule. The three comments in favor of 
implementing the change set forth in the proposed rule reiterate the 
justification specified in the proposed rule.
    The comment in opposition to the proposed rule was submitted by Mr. 
Barry F. Kriebel, President of Sun-Maid Growers of California (Sun-
Maid), an agricultural marketing cooperative comprised of approximately 
1,300 growers.
    Mr. Kriebel claims that the reduction of the desirable carryout 
levels would create an artificial shortage and drive up consumer 
prices. He presents as evidence, a table showing that the field prices 
for Natural (sun-dried) Seedless raisins increased dramatically from 
1984 until the desirable carryout level was changed from 60,000 tons 
for Natural (sun-dried) Seedless raisins to three months of shipments 
(103,090 tons) beginning in the 1989-90 crop year. Mr. Kriebel contends 
that this increase in field prices should not have occurred from 1984 
to 1989 because there was a consistent oversupply of raisins.
    For example, Mr. Kriebel points out that the field price for 
Natural (sun-dried) Seedless raisins was $1,300 per ton during the 
1983-84 crop year, even though only 37.5 percent of the crop was 
declared ``free.'' Although this price was historically high, it was 
caused for the most part by factors other than the desirable carryout 
level for Natural (sun-dried) Seedless raisins. In the 1983-84 crop 
year, the industry attempted to market the large raisin supply without 
decreasing the field price from the prior year. The raisin industry 
managed to moderately increase shipments over the prior year's 
shipments, but not in sufficient quantities to account for the drastic 
increase in raisin supply. An oversupply situation occurred in the 
1983-84 crop year partly because the amount of raisin-variety grapes 
purchased by wineries decreased 57 percent from 1982 to 1983 resulting 
in unusually high Natural (sun-dried) Seedless raisin inventories at 
the end of the 1983-84 crop year. The Natural (sun-dried) Seedless 
raisin field price cannot be adjusted to react to such changes in 
market conditions because it is established early in the crop year 
(normally on or before October 5). It was not until the beginning of 
the 1984-85 crop year that the industry drastically lowered the field 
price to $700 per ton.
    Mr. Kriebel does not provide sufficient evidence that desirable 
carryout levels are solely responsible for the increase in field 
prices. The lowering of the desirable carryout levels has its greatest 
impact on supply during the early part of the crop year, before the new 
crop is harvested. As stated earlier, the decrease in the desirable 
carryout levels from two and one-half months to two months adjusts the 
free market supply during the early part of the crop year and brings it 
more in line with demand. As for the remaining part of the crop year, 
handlers are still provided an opportunity to increase their 
inventories, if necessary, by purchasing raisins from the reserve pool 
under order-mandated 10 plus 10 offers and other releases of reserve 
pool raisins available under the marketing order.
    The desirable carryout was reduced from three months to two and 
one-half months of shipments beginning in the 1991-92 crop year. 
However, the field price has only risen 4 percent from $1115/ton in the 
1990-91 crop year to $1160/ton in 1994-95 crop year. In comparison, the 
consumer price index for food products increased 14.4 percent from 1990 
to 1994.
    Mr. Kriebel also implies that the reduction in the desirable 
carryout will result in a greater amount of raisins being ``aborted'' 
through the Raisin Diversion Program (RDP). The order allows raisin 
growers to participate in the RDP by not growing their grape crop when 
a surplus of raisins exists in the market. Mr. Kriebel does not provide 
evidence of a correlation between the use of the RDP and the desirable 
carryout levels. It may be the case that it is more likely consistent 
surpluses, and thus a need for the RDP, have been caused by the 
downward trend in sales of raisin-variety grapes, particularly Thompson 
Seedless, to wineries. This is because wineries have been receiving a 
greater percentage of their distillation materials from wine-variety 
grapes or from other sugar sources, such as apples. This may also 
partially explain 

[[Page 39840]]
why field prices for Natural (sun-dried) Seedless raisins have 
increased less during the 1990's. Since competition from wineries for 
raisin-variety grapes has decreased, there has been less pressure to 
increase field prices.
    The Department does not find evidence that this rule will cause 
more raisins to be ``aborted'' in the RDP or that raisin prices will 
increase significantly. Instead, this rule seems to provide the 
industry with the means of mitigating the oversupply of raisins early 
in the crop year, and help stabilize market conditions for producers 
and handlers. Thus, no change is being made in response to the above 
comment.
    After thoroughly analyzing the comments received and other 
available information, the Department has concluded that this final 
rule is an appropriate means of solving the marketing problems 
discussed herein.
    Based on available information, the Administrator of the AMS has 
determined that this action will not have a significant economic impact 
on a substantial number of small entities.
    After consideration of all available information, it is found that 
the action, as hereinafter set forth, will tend to effectuate the 
declared policy of the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined that good 
cause exists for not postponing the effective date of this action until 
30 days after publication in the Federal Register because: (1) The 
1995-96 crop year begins August 1, 1995, and this rule should be 
effective promptly because the order requires that the committee meet 
on or before August 15 to compute and announce the trade demand, and 
the desirable carryout level is a necessary item in that calculation; 
and (2) growers and handlers are aware of this rule which was discussed 
and recommended at a public meeting.

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 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 989.154 is revised to read as follows:


Sec. 989.154  Desirable carryout levels.

    The desirable carryout levels to be used in computing and 
announcing a crop year's marketing policy shall be equal to the total 
shipments of free tonnage of the prior crop year during the months of 
August and September, for each varietal type, converted to a natural 
condition basis: Provided, That the desirable carryout levels to be 
used in computing and announcing the 1995-96 crop year's marketing 
policy shall be equal to the total 1994 shipments of free tonnage for 
the months of August and September, and one-fourth of the total 
shipments for the month of October: Provided further, That should the 
prior year's shipments be limited because of crop conditions, the 
Committee may select the total shipments during the months of August 
and September during one of the three crop years preceding the prior 
crop year.

    Dated: July 31, 1995.
Martha B. Ransom,
Acting Deputy Director, Fruit and Vegetable Division.
[FR Doc. 95-19323 Filed 8-3-95; 8:45 am]
BILLING CODE 3410-02-P