[Federal Register Volume 61, Number 228 (Monday, November 25, 1996)]
[Proposed Rules]
[Pages 59840-59843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30086]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 61, No. 228 / Monday, November 25, 1996 / 
Proposed Rules  

[[Page 59840]]



DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 729

Commodity Credit Corporation

7 CFR Part 1446

RIN 0560-AF01, AE43


1997-Crop Peanut National Poundage Quota, 1996 and 1997-Crop 
Additional Peanuts National Average Support Level and Minimum Commodity 
Credit Corporation (CCC) Export Edible Sales Price for the 1996 and 
1997 Crops of Additional Peanuts

AGENCY: Farm Service Agency and Commodity Credit Corporation, USDA.

ACTION: Proposed rule.

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

SUMMARY: The Agricultural Adjustment Act of 1938, (the Act) as amended, 
requires that the national peanut poundage quota for the 1997 crop be 
announced by December 15, 1996. The Agricultural Act of 1949, (the 1949 
Act), as amended, requires that the additional support levels be 
announced not later than February 15, 1997. The minimum CCC export 
edible sales price for additional peanuts is usually announced at the 
same time as the price support levels. This proposed rule would set a 
national poundage quota figure in the range between 1,111,000 short 
tons (st) and 1,155,000 st, proposes that the national average 
additional price support level for the 1997 crop peanuts be set between 
$125 per st and $140 per st, and that the minimum CCC sales price for 
1997 and subsequent crops of additional peanuts for export edible use 
be set between $375 to $425 per st. Also, the rule would recodify 
certain determinations made for peanuts for the 1996 marketing year.

DATES: Comments must be received by December 3, 1996, in order to be 
assured of consideration.

ADDRESSES: Comments must be submitted to the Director, Tobacco and 
Peanuts Division, Farm Service Agency (FSA), United States Department 
of Agriculture, STOP 0514, Room 5750 South Building, P.O. Box 2415, 
Washington, DC 20013-2415. All written submissions will be made 
available for public inspection from 8:15 a.m. to 4:45 p.m., Monday 
through Friday, in Room 5750 South Building, 1400 Independence Avenue, 
SW, Washington, DC 20013-2415.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Robison, Tobacco and 
Peanuts Division, USDA, STOP 0514, Room 5750 South Building, P.O. Box 
2415, Washington, DC 20013-2415, telephone 202-720-9255. Copies of the 
cost-benefit assessment prepared for the rule can be obtained from Mr. 
Robison.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be significant and was 
reviewed by OMB under Executive Order 12866.

Federal Assistance Program

    The title and number of the Federal Assistance Program, as found in 
the Catalog of Federal Domestic Assistance, to which this rule applies 
are: Commodity Loans and Purchases--10.051.

Executive Order 12778

    This rule has been reviewed in accordance with Executive Order 
12778, Civil Justice Reform. The provisions of this proposed rule do 
not preempt State laws, are not retroactive, and do not involve 
administrative appeals.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this proposed rule since neither FSA nor CCC is required 
by 5 U.S.C. 553 or any other provision of law to publish a notice of 
proposed rulemaking with respect to the subject of these 
determinations.

Paperwork Reduction Act

    These proposed amendments do not contain information collections 
that require clearance by the Office of Management and Budget under the 
provisions of 44 U.S.C. chapter 35.

Discussion

    This proposed rule would amend 7 CFR part 729 to set forth the 
1997-crop peanut national poundage quota, and 7 CFR part 1446 to set 
forth the 1996 and 1997-crop national average support level for 
additional peanuts and the minimum CCC sales price for 1996 and 1997 
crop additional peanuts sold for export edible use.

A. National Poundage Quota

    Section 358-1(a)(1) of the Act, as amended in 1996, requires that 
the Secretary set a basic national quota for peanuts for each of the 
1996 through 2002 marketing years (MY) at a level that is equal to the 
quantity of peanuts (in tons) that the Secretary estimates will be 
devoted in each MY to domestic edible use (excluding seed) and related 
uses. As to seed, section 358-1(b)(2)(B) of the Act provides that a 
temporary allocation of quota pounds for the MY only in which the crop 
is planted shall be made to producers for each of the 1996 through 2002 
MYs and that the temporary seed quota allocation shall be equal to the 
pounds of seed peanuts planted on the farm as may be adjusted and 
determined under regulations prescribed by the Secretary. Regulations 
implementing the 1996 amendments to the peanut quota provisions of the 
Act were published in the Federal Register on July 16, 1996 (61 FR 
36997). The MY for 1997-crop peanuts will be from August 1, 1997 
through July 31, 1998.
    The national poundage quota for MY 1996 was 1,100,000 st. This rule 
proposes that the national poundage quota for MY 1997 be set between 
1,111,000 st and 1,155,000 st based on the following data:

  Estimated Domestic Edible, Excluding Seed, and Related Uses for 1997- 
                              Crop Peanuts                              
------------------------------------------------------------------------
                                                                        
------------------------------------------------------------------------
Domestic Edible Use:                                                    
(1)Short Tons                                                           
    Domestic food.......................         913,000         913,000

[[Page 59841]]

                                                                        
    On farm and local sales.............           8,500           8,500
Related Uses:                                                           
     Crushing residual..................         120,500         120,500
    Shrinkage and other losses..........          36,500          36,500
    Transfer to quota...................           5,000           5,000
                                         -------------------------------
      Subtotal..........................       1,083,500       1,083,500
    Allowance for underproduction.......          27,500          71,500
                                         ===============================
      Totals............................       1,111,000       1,155,000
------------------------------------------------------------------------

    The estimate of 1997 domestic food use was developed in two steps. 
First, total domestic edible utilization of 1,062,500 st was estimated 
by the USDA Interagency Commodity Estimates Committee (ICEC). Second, 
this estimate was reduced by 149,500 st to exclude peanut imports, 
peanut butter imports, and peanut butter exports. Although estimates of 
domestic edible utilization typically include product exports, peanut 
butter exports are generally either made from, or may otherwise be 
credited under section 358(e)(1) of the Act as being made from 
additional peanuts. MY 1997 farm use and local sales were estimated at 
1 percent of ICEC's MY 1997 production estimate. This percentage 
reflects the average difference between USDA production data and 
Federal-State Inspection Service inspections data. About one-half of 
farm use and local sales is allocated to food use and the remainder to 
seed, which is excluded from quota determinations under amendments to 
the Act made by the Federal Agriculture Improvement and Reform Act of 
1996 (1996 Act).
    The crushing residual represents the farmer stock equivalent weight 
of crushing grade kernels shelled from quota peanuts. In any given load 
of farmer stock peanuts, a portion of such peanuts is only suitable for 
the crushing market. The quota must be sufficient to provide for the 
shelling of both edible and crushing grades. The crushing residual 
identified above reflects the assumption that crushing grade peanuts 
will be about 12 percent, on a farmer stock basis, of the total of MY 
1997 domestic edible use production.
    The allowance for shrinkage and other losses is an estimate of 
reduced kernel weight available for milling as well as for kernel 
losses due to damage, fire, and spillage. These losses were estimated 
by multiplying a factor of 0.04 times domestic edible use. This factor 
is the minimum shrinkage generally allowed for calculating obligations 
of handlers under section 359a(d)(2)(B)(iv) of the Act and is believed 
to be a fair estimate of such shrinkage for purposes of this 
determination, taking into account all factors.
    Segregation 2 and 3 loan transfers to quota loan represent 
transfers of Segregation 2 and 3 peanuts from additional price support 
loan pools to quota loan pools. Such transfers occur when quota peanut 
producers have insufficient Segregation 1 peanuts to fill their quotas, 
yet have Segregation 2 and 3 peanuts in additional loan pools which 
would have been eligible to be pledged as collateral for price support 
loans at a discounted quota loan rate.
    In addition, an allowance has been made for underproduction. 
Historically, only 92 percent of the quota has been marketed. Since any 
quota pounds not marketed will be a loss of potential income for 
producers, it is expected that somewhat more than 92 percent of the 
quota will be marketed.
    The lowest proposed 1997 quota level, as set forth above, reflects 
expected growth in domestic consumption of peanut products through new 
uses and a small increase in demand resulting from lower peanut support 
prices. This level essentially reflects the 1996 quota assumption that 
97.5 percent of the quota will be produced and adds increased demand 
for edible peanuts. The higher range proposal takes into account the 
possibility that production of quota could fall below the 97.5 percent 
level.
    A significantly larger quota option than those presented would 
lower the price received by first buyers and could reduce costs to 
consumers for peanut products slightly. However, it is assumed that a 
substantial increase in quota would be needed to lower the average 
grower price to a level near the average national support price. A 
quota in the neighborhood of 1,500,000 tons would likely result in 
sufficient qualities and quantities of peanuts delivered at the right 
time and place such that the average price would be only slightly 
higher than $610 per ton.
    This option only becomes viable if one assumes greater 
responsiveness in demand to additional supplies. One must assume a 
significant growth in demand because of a lower price to justify this 
option.
    The cost of overestimating demand would be high. Assuming the 
demand for greater supplies of peanuts is slight, this level of quota 
could result in a surplus and a loss on loan placements for more than 
300,000 tons of peanuts. These peanut losses would be around $400 a 
ton. Losses of up to $120 million would occur and result in producer 
assessments of over $100 per ton the following year. This level of 
assessment would lower the effective price received by producers for 
quota peanuts in MY 1998 to near $500 per ton or less.
    USDA will attempt to increase the accuracy and quantity of price 
data (quota and additional) over the next years to enhance analytical 
capacity and reduce the uncertainty associated with different options.
    Buybacks have worked well in MY 1996. Buyback is a term used to 
describe a marketing transaction in which a producer places additional 
peanuts under loan at the additional loan rate and a handler 
simultaneously purchases such peanuts from the marketing associations 
for domestic edible use. To bolster stocks in MY 1996, the peanut 
industry has bought back over 100,000 tons of additional peanuts.

B. Additional Peanut Support Level

    Section 155(b)(2) of the 1996 Act provides that price support shall 
be made available for additional peanuts at such level as the Secretary 
determines will ensure no losses to CCC from the sale or disposal of 
such peanuts, taking into consideration the demand for peanut oil and 
peanut meal, expected prices of other vegetable oils and protein meals, 
and the demand for peanuts in foreign markets.
    The MY 1996 price support level for additional peanuts was 
announced at $132 per st on February 15, 1996. The national average 
price support rate for

[[Page 59842]]

quota peanuts, for each of the 1996 through 2002 crops, was set at $610 
per st by the 1996 Act and is codified at 7 CFR Sec. 1446.103.
    The regulation pertaining to price support loan levels for 
additional peanuts is being moved in 7 CFR from part 1421 to part 1446.
    The range for the MY 1997 price support level for additional 
peanuts is recommended to be between $125 per st and $140 per st to 
ensure no losses to CCC from the sale or disposal of additional 
peanuts. Peanuts are pledged as collateral for price support loans. The 
peanuts are then sold out of inventory in order to recoup the loan 
principal, interest and related costs. The statutory factors have been 
analyzed as set out below. Based on those factors, it is anticipated 
that while the current oil market is strong, there is enough 
uncertainty in the market to suggest caution.
    In making this determination, the following market information will 
be considered:
    1. The domestic use of peanut oil during MY 1997 is forecast to be 
92,500 st, unchanged from MY 1996 projected domestic use. MY 1997 
peanut oil beginning stocks are expected to be 18,500 st, down 44 
percent from MY 1996. The MY 1997 average peanut oil price is expected 
to be $0.380 per pound, down $0.015 per pound from MY 1996.
    2. The domestic use of peanut meal during MY 1997 is forecast to be 
140,000 st, up 5,000 st from MY 1996 projected domestic use. MY 1997 
peanut meal beginning stocks are expected to be 4,000 st, unchanged 
from MY 1996. The MY 1997 average peanut meal price is expected to be 
$227.50 per st, down $2.50 per st from MY 1996.
    3. The domestic disappearance of soybean oil during MY 1997 is 
forecast to be 6,850,000 st, up 1.1 percent from projected MY 1996 
domestic disappearance. MY 1997 soybean oil beginning stocks are 
expected to be 1,117,500 st, up 11.2 percent from MY 1996. The MY 1997 
average soybean oil price is expected to be $0.230 per pound, down 
$0.005 per pound from MY 1996.
    4. The domestic disappearance of cottonseed oil during MY 1997 is 
forecast to be 517,500 st, up 2 percent from projected MY 1996 domestic 
disappearance. MY 1997 cottonseed oil beginning stocks are expected to 
be 55,000 st, up 10 percent from MY 1996. The MY 1997 average 
cottonseed oil price is expected to be $0.260 per pound, down $0.0025 
per pound from MY 1996.
    5. The domestic disappearance of soybean meal during MY 1997 is 
forecast to be 27,000,000 st, up 0.9 percent from projected MY 1996 
domestic disappearance. MY 1997 soybean meal beginning stocks are 
expected to be 225,000 st, up 12.5 percent from MY 1996. The MY 1997 
average soybean meal price is expected to be $227.50 per st, down $7.50 
per st from MY 1996.
    6. The domestic disappearance of cottonseed meal during MY 1997 is 
forecast to be 1,690,000 st, up 0.9 percent from projected MY 1996 
domestic disappearance. MY 1997 cottonseed meal beginning stocks are 
expected to be 40,000 st, unchanged from MY 1996. The MY 1997 average 
cottonseed meal price is expected to be $182.50 per st, down $7.50 per 
st from MY 1996.
    7. The world use of peanuts for MY 1996 is expected to be 26.36 
million metric tons, up slightly from MY 1995. World peanut production 
for MY 1996 is forecast to be 26.36 million metric tons, up 1.7 percent 
from MY 1995. Ending stocks for MY 1996 are forecast at 0.46 million 
metric tons, unchanged from 1995.

C. Minimum CCC Sales Price for Additional Peanuts Sold for Export 
Edible Use

    A minimum price at which 1997 crop additional peanuts owned or 
controlled by CCC may be sold for use as edible peanuts in export 
markets is a discretionary action that, by practice, is expected to be 
announced on or before February 15, 1997, the same time that the quota 
and additional peanut support levels for the 1997 crop are announced. 
The announcement of that price provides producers and handlers with 
information to facilitate the negotiation of private contracts for the 
sale of additional peanuts for export.
    An overly high price may create an unrealistic expectation of high 
pool dividends and discourage private sales. If too low, the minimum 
price could have an unnecessary, adverse effect on prices paid to 
producers for additional peanuts.
    It is proposed that the minimum price at which 1997 crop additional 
peanuts owned or controlled by CCC may be sold for use as edible 
peanuts in export markets be established within the range of $375 to 
$425 per st. This range should encourage exports while providing price 
stability for additional peanuts sold under contract. It will also help 
assure handlers that CCC will not undercut their export contracting 
efforts with offerings of additional peanuts for export edible sale 
below the minimum sales price.

D. Technical Amendments

    Due to recent amendments to 7 CFR parts 729 and 1421, it has become 
necessary to recodify the 1996 quota determination and the 1996 
additional peanut support determination. The latter has been moved to 
part 1446.
    Accordingly, comments are requested with respect to the foregoing 
issues.

List of Subjects

7 CFR Part 729

    Peanuts, Penalties, Poundage quotas, Reporting and recordkeeping 
requirements.

7 CFR Part 1446

    Loan programs--Agriculture, Peanuts, Price support programs, 
Reporting and recordkeeping requirements, Warehouses.

    Accordingly, it is proposed that 7 CFR parts 729 and 1446 be 
amended as follows:

PART 729--PEANUTS

    1. The authority citation for 7 CFR part 729 shall continue to read 
as follows:

    Authority: 7 U.S.C. 1301, 1357 et seq., 1372, 1373, 1375, and 
7271.

    2. Section 729.216 is amended by adding new paragraphs (c) and (d) 
to read as follows:


Sec. 729.216   National poundage quota.

* * * * *
    (c) The national poundage quota for quota peanuts for marketing 
year 1996 is 1,100,000 short tons.
    (d) The national poundage quota for quota peanuts for marketing 
year 1997 will be set between 1,111,000 and 1,155,000 short tons.

PART 1446--PEANUTS

    3. The authority citation for 7 CFR part 1446 shall continue to 
read as follows:

    Authority: 7 U.S.C. 7271, 15 U.S.C. 714b and 714c.


Sec. 1446.103  [Amended]

    4. Section 1446.103 is amended in paragraph (1) of the definition 
of ``Support rate'' by adding the words ``as set out in section 
1446.310'' after ``announced by the Secretary''.
    5. Two new Secs. 1446.310 and 1446.311 are added to subpart C to 
read as follows:

[[Page 59843]]

Sec. 1446.310   Additional peanut support levels.

    (a) The national support rate for additional peanuts for the 1996 
crop is $132 per short ton.
    (b) The national support rate for additional peanuts for the 1997 
crop will be between $125 per short ton and $140 per short ton.


Sec. 1446.311   Minimum CCC sales price for certain peanuts.

    (a) The minimum CCC sales price for additional peanuts to be sold 
from the price support loan inventory for export edible use from the 
1996 crop is $400 per short ton.
    (b) The minimum CCC sales price for additional peanuts to be sold 
from the price support loan inventory for export edible use from the 
1997 and subsequent crops will be between $375 and $425 per short ton.

    Signed at Washington, DC, on November 20, 1996.
Grant Buntrock,
Administrator, Farm Service Agency, and Executive Vice President, 
Commodity Credit Corporation.
[FR Doc. 96-30086 Filed 11-20-96; 4:47 pm]
BILLING CODE 3410-05-P