[Federal Register Volume 62, Number 177 (Friday, September 12, 1997)]
[Rules and Regulations]
[Pages 47913-47923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-24307]



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  Federal Register / Vol. 62, No. 177 / Friday, September 12, 1997 / 
Rules and Regulations  

[[Page 47913]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV97-905-1 IFR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Limiting the Volume of Small Florida Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This interim final rule limits the volume of small red 
seedless grapefruit entering the fresh market under the Florida citrus 
marketing order. The marketing order regulates the handling of oranges, 
grapefruit, tangerines, and tangelos grown in Florida and is 
administered locally by the Citrus Administrative Committee 
(committee). This rule limits the volume of size 48 and/or size 56 red 
seedless grapefruit handlers can ship during the first 11 weeks of the 
1997-1998 season that begins in September. This limitation provides a 
sufficient supply of small sized red seedless grapefruit to meet market 
demand, without saturating all markets with these small sizes. This 
rule is necessary to help stabilize the market and improve grower 
returns.

DATES: Effective September 15, 1997, through November 30, 1997. 
Comments received by September 22, 1997 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 in triplicate to the Docket 
Clerk, Fruit and Vegetable Division, 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: Christian D. Nissen, Southeast 
Marketing Field Office, Marketing Order Administration Branch, F&V, 
AMS, USDA, P.O. Box 2276, Winter Haven, Florida 33883; telephone: (941) 
299-4770, Fax: (941) 299-5169; or Anne Dec, Marketing Order 
Administration Branch, F&V, AMS, USDA, room 2522-S, P.O. Box 96456, 
Washington, DC 20090-6456; telephone: (202) 720-5053, Fax: (202) 720-
5698. Small businesses may request information on compliance with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, F&V, AMS, USDA, room 2525-S, P.O. Box 96456, Washington, DC 
20090-6456; telephone (202) 720-2491, Fax: (202) 720-5698.

SUPPLEMENTARY INFORMATION: This interim final rule is issued under 
Marketing Agreement No. 84 and Marketing Order No. 905, both as amended 
(7 CFR part 905), regulating the handling of oranges, grapefruit, 
tangerines, and tangelos grown in Florida, hereinafter referred to as 
the ``order.'' The marketing agreement and order are 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 interim final rule has been reviewed under Executive Order 
12988, Civil Justice Reform. This rule is not intended to have 
retroactive effect. 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 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.
    The order provides for the establishment of grade and size 
requirements for Florida citrus, with the concurrence of the Secretary. 
These grade and size requirements are designed to provide fresh markets 
with citrus fruit of acceptable quality and size. This helps create 
buyer confidence and contributes to stable marketing conditions. This 
is in the interest of growers, handlers, and consumers, and is designed 
to increase returns to Florida citrus growers. The current minimum 
grade standard for red seedless grapefruit is U.S. No. 1, and the 
minimum size requirement is size 56 (at least 3\5/16\ inches in 
diameter).
    Section 905.52 of the citrus marketing order provides authority to 
limit shipments of any grade or size, or both, of any variety of 
Florida citrus. Such limitations may restrict the shipment of a portion 
of a specified grade or size of a variety. Under such a limitation, the 
quantity of such grade or size that may be shipped by a handler during 
a particular week is established as a percentage of the total shipments 
of such variety by such handler in a prior period, established by the 
committee and approved by the Secretary, in which the handler shipped 
such variety.
    Section 905.153 of the order provides procedures for limiting the 
volume of small red seedless grapefruit entering the fresh market. The 
procedures specify that the committee may recommend that only a certain 
percentage of size 48 and/or 56 red seedless grapefruit be made 
available for shipment into fresh market channels for any week or weeks 
during the regulatory period. The 11 week period begins the third 
Monday in September. Under such a limitation, the quantity of sizes 48 
and/or 56 red seedless grapefruit that may be shipped by a handler 
during a regulated week is calculated using the recommended percentage. 
By taking the recommended weekly percentage times the average weekly 
volume of red grapefruit handled by such handler in

[[Page 47914]]

the previous five seasons, handlers can calculate the volume of sizes 
48 and/or 56 they may ship in a regulated week.
    This rule limits the volume of small red seedless grapefruit 
entering the fresh market for each week of an 11 week period beginning 
the week of September 15. The rule limits the volume of sizes 48 and/or 
56 red seedless grapefruit by establishing a weekly percentage for each 
of the 11 weeks. This rule establishes the weekly percentage for the 
first three weeks (September 15 through October 5) at 50 percent, for 
the next three weeks (October 6 through October 26) at 35 percent, and 
at 30 percent for the remainder of the 11 weeks. This is a change in 
the percentage originally recommended by the committee. The committee 
had voted to establish a weekly percentage of 25 percent for each of 
the 11 weeks in a vote of 10 in favor to 7 opposed at its meeting on 
May 28, 1997. The committee recommended adjusting the percentages at 
its meeting August 26, 1997, in a vote of 14 in favor to 3 opposed.
    For the past few seasons, returns on red seedless grapefruit have 
been at all time lows, often not returning the cost of production. On 
tree prices for red seedless grapefruit have declined steadily from 
$9.60 per box (1\3/5\ bushel) during the 1989-90 season, to $3.11 per 
box during the 1992-93 season, to $1.82 per box during the 1994-95 
season, to $1.55 per box during the 1996-97 season. The committee 
believes that to stabilize the market and improve returns to growers, 
demand for fresh red seedless grapefruit must be stabilized and 
increased.
    One problem contributing to the current state of the market is the 
excessive number of small sized grapefruit shipped early in the 
marketing season. During the past three seasons, sizes 48 and 56 
accounted for 34 percent of total shipments during the 11 week 
regulatory period, with the average weekly percentage exceeding 40 
percent of shipments. This contrasts with sizes 48 and 56 representing 
only 26 percent of total shipments for the remainder of the season. 
While there is a market for early grapefruit, the shipment of large 
quantities of small red seedless grapefruit in a short period 
oversupplies the fresh market for these sizes and negatively impacts 
the market for all sizes.
    For the majority of the season, larger sizes return better prices 
than smaller sizes. However, there is a push early in the season to get 
fruit into the market to take advantage of the higher prices available 
at the beginning of the season. The early season crop tends to have a 
greater percentage of small sizes. This creates a glut of smaller, 
lower priced fruit on the market that drives down the price for all 
sizes. Early in the season, larger sized fruit commands a premium 
price. In some cases, the f.o.b. is $4 to $6 a carton (\4/5\ bushel) 
more than for the smaller sizes. In early October, the f.o.b. for a 
size 27 averages around $10.00 per carton. This compares to an average 
f.o.b. of $5.50 per carton for size 56. By the end of the 11 week 
period outlined in this rule, the f.o.b. for large sizes has dropped to 
within two dollars of the f.o.b. for small sizes.
    In the past three seasons, during the period covered by this rule, 
prices of red seedless grapefruit have fallen from a weighted average 
f.o.b. of $7.80 per carton to an average f.o.b. of $5.50 per carton. 
Even though later in the season the crop has sized to naturally limit 
the amount of smaller sizes available for shipment, the price structure 
in the market has already been negatively affected. In the past three 
years, the market has not recovered, and the f.o.b. for all sizes fell 
to around $5.00 to $6.00 per carton for most of the rest of the season.
    The committee discussed this issue at length at several meetings. 
The committee believes that the over shipment of smaller sized red 
seedless grapefruit early in the season has contributed to below 
production cost returns for growers and lower on tree values. An 
economic study done by the University of Florida--Institute of Food and 
Agricultural Sciences (UF-IFAS) in May 1997, found that on tree prices 
have fallen from a high near $7.00 in 1991-92 to around $1.50 for this 
past season. The study projects that if the industry elects to make no 
changes, the on tree price will remain around $1.50. The study also 
indicates that increasing minimum size restrictions could help to raise 
returns.
    The committee examined shipment data covering the 11 week 
regulatory period for the last four seasons. The information contained 
the amounts and percentages of sizes 48 and 56 shipped during each 
week. They compared this information with tables outlining weekly 
f.o.b. figures for each size. Based on this statistical information 
from past seasons, the committee members believe there is an indication 
that once shipments of sizes 48 and 56 reach levels above 250,000 
cartons a week, prices decline on those and most other sizes of red 
seedless grapefruit. Without volume regulation, the industry has been 
unable to limit the shipments of small sizes. The committee believes 
that if shipments of small sizes can be maintained at around 250,000 
cartons a week, prices should stabilize and demand for larger, more 
profitable sizes should increase.
    The committee has had considerable discussion regarding at what 
level to establish the weekly percentages. They wanted to recommend 
weekly percentages that would provide a sufficient volume of small 
sizes without adversely impacting the markets for larger sizes. At its 
May 28, 1997, meeting, the committee recommended that the percentage 
for each of the 11 weeks be established at the 25 percent level. Their 
reasoning was that this percentage, when combined with the average 
weekly shipments for the total industry, provided a total industry 
allotment of 244,195 cartons of sizes 48 and/or 56 red seedless 
grapefruit per regulated week. This percentage would have allowed total 
shipments of small red seedless grapefruit to approach the 250,000 
carton mark during regulated weeks without exceeding it.
    The committee met again August 26, 1997, and revisited the weekly 
percentage issue. At the meeting, the committee recommended that the 
weekly percentages be changed from 25 percent for each of the 11 
regulated weeks to 50 percent for the first three weeks (September 15 
through October 5), 35 percent for the next three weeks (October 6 
through October 26), and 30 percent for the remainder of the 11 weeks.
    In its discussion of this change, the committee reviewed the 
initial percentages recommended and the current state of the crop. The 
committee also reexamined shipping information from past seasons, 
looking particularly at volume across the 11 weeks. Based on shipments 
from the past four seasons, available allotment under a 25 percent 
restriction would have exceeded actual shipments for each of the first 
three weeks that are regulated under this rule.
    The committee recognized that in terms of available allotment, 
establishing a weekly percentage of 25 percent for the first three 
regulated weeks would not be restrictive. However, they said that this 
was based on total available allotment, not on data for each individual 
handler. The committee determined that if available allotment would 
exceed shipments for the first three weeks even when establishing a 
percentage of 25 percent, it would give individual handlers greater 
flexibility during these three weeks to establish the percentage at 50 
percent. They argued that this would provide each handler with 
additional allotment during these three weeks, reducing the number of 
loans and transfers needed to utilize the available

[[Page 47915]]

allotment, yet having little or no affect on the volume of small sizes. 
The committee also agreed that setting the percentage at 50 percent 
rather than 100 percent would still provide some restriction should 
shipments for September 15 through October 5 for this season exceed 
past quantities.
    For the remainder of the 11 weeks, the committee believed that the 
weekly percentage needed to be less than 50 percent (which would have 
resulted in virtually no limitation on shipments of small sizes) but 
greater than 25 percent. The committee held that it is important to 
control small sizes, but it is also important to be able to service the 
markets that demand small sizes. The issue was raised regarding the 
possible market impact when small sizes exceed 250,000 cartons in a 
week. The committee recognized that ideally, 244,195 cartons of red 
seedless grapefruit would be available to the industry for each of the 
11 weeks if the percentage was set at 25 percent. However, the 
committee was concerned that the true amount available would be lower.
    Several members stated that setting a weekly percentage at 25 
percent to approximate the 250,000 cartons was based on total 
utilization of allotment, and that assumption was unreasonable. The 
committee agreed that loans and transfers are beneficial, but that even 
with their availability a percentage of allotment would most likely not 
be used.
    Several other members raised concerns about focusing too much on 
total allotment available, rather than on allotment available to 
individual handlers. The committee stated that the way a handler's base 
is calculated using an average week is probably the most equitable way 
to do so. However, they acknowledged that it did present some problems. 
Members concurred that the season for red seedless grapefruit is 
approximately 33 weeks. However, the members agreed that this did not 
mean that every handler was shipping during all 33 weeks. They 
discussed how a handler's average weekly shipments are calculated by 
averaging their shipments from the past five seasons, and then dividing 
this number by the 33 weeks to establish an average week. Members 
stated that the calculated average week was often lower than their 
actual weekly shipments during the periods they were shipping because 
they were not shipping during all 33 weeks. They also stated that 
applying a weekly percentage of 25 percent to their average week would 
have resulted in limiting their shipments to a level closer to 15 
percent of their actual shipments during this period.
    Based on this discussion, the committee thought a weekly percentage 
of 25 percent would be overly restrictive. The committee believed that 
since total available allotment most probably will not be fully 
utilized, and how individual handlers are affected, establishing a 
weekly percentage of 35 percent for the regulation weeks October 6 
through October 26 would be more appropriate. They believe this level 
will provide a sufficient supply of small sizes without exceeding 
amounts that would negatively affect other markets.
    The committee further recommended that the weekly percentage for 
the remainder of the 11 weeks be established at 30 percent. The 
committee resolved that a lower percentage was desirable moving into 
the last five weeks of regulation. The committee believed that as 
industry moves into the season and shipments increase, that a weekly 
percentage of 30 percent will provide the best balance between supply 
and demand for small sized red seedless grapefruit.
    The committee again included in its deliberations that if crop and 
market conditions should change, the committee could recommend that the 
percentages be increased or eliminated to provide for the shipment of 
more small sizes in any one, or all of the 11 weeks. While the official 
crop estimate will not be available until October, information in the 
UF-IFAS study and committee discussions indicate that the 1997-98 
season production will be near or greater than the 1996-97 estimate of 
30.8 million boxes of red seedless grapefruit. Committee members also 
stated that the crop is sizing well and should produce a greater number 
of larger sizes than the past season. Using this information on the 
1997-98 crop, the committee members believe that establishing the 
weekly percentages as recommended will provide enough small sizes to 
supply those markets without disrupting the markets for larger sizes.
    Under the procedures in section 905.153, the quantity of sizes 48 
and/or 56 red seedless grapefruit that may be shipped by a handler 
during a regulated week is calculated using the recommended percentage 
for that week. By taking the established weekly percentage times the 
average weekly volume of red grapefruit handled by such handler in the 
previous five seasons, handlers can calculate the volume of sizes 48 
and/or 56 they may ship in a regulated week.
    An average week has been calculated by the committee for each 
handler using the following formula. The total red seedless grapefruit 
shipments by a handler during the 33 week period beginning the third 
Monday in September and ending the first Sunday in May during the 
previous five seasons are added and divided by five to establish an 
average season. This average season is then divided by the 33 weeks in 
a season to derive the average week. This average week is the base for 
each handler for each of the 11 weeks contained in the regulation 
period. The applicable weekly percentage is then multiplied by a 
handler's average week. The total is that handler's allotment of sizes 
48 and/or 56 red seedless grapefruit for the given week.
    Under this interim final rule, the calculated allotment is the 
amount of small sized red seedless grapefruit a handler can ship. If 
the minimum size established under section 905.52 remains at size 56, 
handlers can fill their allotment with size 56, size 48, or a 
combination of the two sizes such that the total of these shipments are 
within the established limits. If the minimum size under the order is 
48, handlers can fill their allotment with size 48 fruit such that the 
total of these shipments are within the established limits. The 
committee staff will perform the specified calculations and provide 
them to each handler.
    To illustrate, suppose Handler A shipped a total of 50,000 cartons, 
64,600 cartons, 45,000 cartons, 79,500 cartons, and 24,900 cartons of 
red seedless grapefruit in the last five seasons, respectively. Adding 
these season totals and dividing by five yields an average season of 
52,800 cartons. The average season is then divided by 33 weeks to yield 
an average week, in this case, 1,600 cartons. This is handler A's base. 
Assuming the weekly percentage is 50 percent, this percentage is then 
applied to the handler's base. This provides this handler with a weekly 
allotment of 800 cartons (1,600  x  .50) of size 48 and/or 56.
    The average week for handlers with less than five previous seasons 
of shipments is calculated by the committee by averaging the total 
shipments for the seasons they did ship red seedless grapefruit during 
the immediately preceding five years and dividing that average by 33. 
New handlers with no record of shipments have no prior period on which 
to base their average week. Therefore, a new handler can ship small 
sizes up to the established weekly percentage as a percentage of their 
total volume of shipments during their first shipping week. Once a new 
handler has established shipments, their average

[[Page 47916]]

week is calculated as an average of the weeks they have shipped during 
the current season.
    This interim final rule establishes a weekly percentage of 50 
percent for the first three weeks (September 15 through October 5), 35 
percent for the next three weeks (October 6 through October 26), and 30 
percent for the remainder of the 11 weeks to be regulated. The 
regulatory period runs from the first Monday in September (September 
15, 1997) through the last Sunday in November (November 30, 1997). Each 
regulation week begins Monday at 12:00 a.m. and ends at 11:59 p.m. the 
following Sunday, since most handlers keep records based on Monday 
being the beginning of the work week. If necessary, the committee can 
meet and recommend changes in the percentages to the Secretary at any 
time during the regulatory period.
    The rules and regulations contain a variety of provisions designed 
to provide handlers with some marketing flexibility. When regulation is 
established by the Secretary for a given week, the committee calculates 
the quantity of small red seedless grapefruit which may be handled by 
each handler. Section 905.153(d) provides allowances for overshipments, 
loans, and transfers of allotment. These allowances should allow 
handlers the opportunity to supply their markets while limiting the 
impact of small sizes on a weekly basis.
    During any week for which the Secretary has fixed the percentage of 
sizes 48 and/or 56 red seedless grapefruit, any handler can handle an 
amount of sizes 48 and/or 56 red seedless grapefruit not to exceed 110 
percent of their allotment for that week. The quantity of overshipments 
(the amount shipped in excess of a handler's weekly allotment) will be 
deducted from the handler's allotment for the following week. 
Overshipments are not allowed during week 11 because there are no 
allotments the following week from which to deduct the overshipments.
    If handlers fail to use their entire allotments in a given week, 
the amounts undershipped will not be carried forward to the following 
week. However, a handler to whom an allotment has been issued can lend 
or transfer all or part of such allotment (excluding the overshipment 
allowance) to another handler. In the event of a loan, each party will, 
prior to the completion of the loan agreement, notify the committee of 
the proposed loan and date of repayment. If a transfer of allotment is 
desired, each party will promptly notify the committee so that proper 
adjustments of the records can be made. In each case, the committee 
will confirm in writing all such transactions prior to the following 
week. The committee can also act on behalf of handlers wanting to 
arrange allotment loans or participate in the transfer of allotment. 
Repayment of an allotment loan is at the discretion of the handlers 
party to the loan.
    The committee computes each handler's allotment by multiplying the 
handler's average week by the percentage established by regulation for 
that week. The committee will notify each handler prior to that 
particular week of the quantity of sizes 48 and 56 red seedless 
grapefruit such handler can handle during a particular week, making the 
necessary adjustments for overshipments and loan repayments.
    This rule does not affect the provision that handlers may ship up 
to 15 standard packed cartons (12 bushels) of fruit per day exempt from 
regulatory requirements. Fruit shipped in gift packages that are 
individually addressed and not for resale, and fruit shipped for animal 
feed are also exempt from handling requirements under specific 
conditions. Also, fruit shipped to commercial processors for conversion 
into canned or frozen products or into a beverage base are not subject 
to the handling requirements under the order.
    During committee deliberations at the May 28, 1997, meeting, 
several concerns were raised regarding this regulation. One area of 
concern was the possible impact this regulation may have on exports. 
Several members stated that there is a strong demand in some export 
markets for small sizes. Other members responded that the percentages 
set allow handlers enough volume of small sizes to meet the demand in 
these markets. It was also stated that any shortfall an individual 
handler might have can be filled by loan or transfer. There was also 
some discussion that markets that normally demand small sizes have 
shown a willingness to purchase larger sizes. In addition, committee 
data indicate that the majority of export shipments occur after the 11 
week period when there are no restrictions on small sizes.
    Another concern raised was the effect this rule will have on 
packouts. It was stated that this rule can reduce the volume packed, 
resulting in higher packinghouse costs. The purpose of this rule is to 
limit the volume of small sizes marketed early in the season. Larger 
sizes can be substituted for smaller sizes with a minimum effect on 
overall shipments. This rule may require more selective picking of only 
the sizes desired, something that many growers are doing already. The 
UF-IFAS study presented indicated that it would increase returns if 
growers would harvest selectively and return to repick groves as the 
grapefruit sized. This also would allow growers to maximize returns on 
fresh grapefruit by not picking unprofitable grades and sizes of red 
grapefruit that will be sent to the less profitable processing market. 
The study also indicated that selective harvesting can reduce the 
f.o.b. cost per carton. Therefore, this action should have a positive 
impact on grower returns.
    Several members were concerned about what would happen if market 
conditions were to change. Other committee members responded that if 
industry conditions were to change (for example, if there was a freeze, 
or if the grapefruit was not sizing), the committee can meet and 
recommend that the percentage be raised to allow for more small sizes, 
or that the limits be removed all together.
    Another concern raised was that market share could be lost to 
Texas. According to the Economic Analysis Branch (EAB), of the Fruit 
and Vegetable Division, of the Agricultural Marketing Service (AMS), 
limiting shipments of small Florida grapefruit will probably not result 
in a major shift to Texas grapefruit because the Texas industry is much 
smaller and has higher freight costs to some markets supplied by 
Florida. The UF-IFAS study made similar findings. Texas production is 
much smaller and has been susceptible to freezes that take it out of 
the market. This has lessened its impact on the overall grapefruit 
market.
    One handler expressed that they ship early in the season and this 
action could be very restrictive. Members responded that the 
availability of loans and transfers address these concerns. There was 
also discussion of how restrictive this rule actually is. Based on 
shipments from the past four seasons, available allotment would have 
exceeded actual shipments for each of the first three weeks that are 
regulated under this rule even if the weekly percentage was set at 25 
percent. In the three seasons prior to last season, if a 25 percent 
restriction on small sizes had been applied during the 11 week period, 
only an average of 4.2 percent of overall shipments during that period 
would have been affected. This rule affects even fewer shipments by 
establishing less restrictive weekly percentages. In addition, a large 
percentage of this volume most likely could have been replaced by 
larger sizes. A sufficient volume of small sized red grapefruit is 
still allowed into all channels of trade, and allowances are in

[[Page 47917]]

place to help handlers address any market shortfall.
    At the August 26, 1997, meeting, the concern was raised that the 
weekly percentages recommended were not restrictive enough. Committee 
members responded that not all available allotment would be utilized, 
and that the recommended percentages would still restrict shipments of 
small sizes, while providing handlers with flexibility to supply those 
markets that demand small sizes.
    After considering the concerns expressed, and the available 
information, the committee determined that this rule was needed to 
regulate shipments of small sized red seedless grapefruit.
    Section 8(e) of the Act requires that whenever grade, size, quality 
or maturity requirements are in effect for certain commodities under a 
domestic marketing order, including grapefruit, imports of that 
commodity must meet the same or comparable requirements. This rule does 
not change the minimum grade and size requirements under the order, 
only the percentages of sizes 48 and/or 56 red grapefruit that may be 
handled. Therefore, no change is necessary in the grapefruit import 
regulations as a result of this action.
    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 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 80 handlers subject to regulation under the 
order and approximately 11,000 growers of citrus in the regulated area. 
Small agricultural service firms, which includes handlers, have been 
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 are defined as those having annual receipts of 
less than $500,000.
    Based on the Florida Agricultural Statistics Service and committee 
data for the 1995-96 season, the average annual f.o.b. price for fresh 
Florida red grapefruit during the 1995-96 season was $5.00 per 4/5 
bushel cartons for all grapefruit shipments, and the total shipments 
for the 1995-96 season were 23 million cartons of grapefruit. 
Approximately 20 percent of all handlers handled 60 percent of Florida 
grapefruit shipments. In addition, many of these handlers ship other 
citrus fruit and products which are not included in committee data but 
would contribute further to handler receipts. Using the average f.o.b. 
price, about 80 percent of grapefruit handlers could be considered 
small businesses under SBA's definition and about 20 percent of the 
handlers could be considered large businesses. The majority of Florida 
grapefruit handlers, and growers may be classified as small entities.
    The committee believes that the over shipment of smaller sized red 
seedless grapefruit early in the season has contributed to below 
production cost returns for growers and lower on tree values. For the 
past few seasons, returns on red seedless grapefruit have been at all 
time lows, often not returning the cost of production. On tree prices 
for red seedless grapefruit have declined steadily from $9.60 per box 
during the 1989-90 season, to $3.11 per box during the 1992-93 season, 
to $1.82 per box during the 1994-95 season, to $1.55 per box during the 
1996-97 season. The committee believes that to stabilize the market and 
improve returns to growers, demand for fresh red seedless grapefruit 
must be stabilized and increased.
    Under the authority of section 905.52 of the order, this rule 
limits the volume of small red seedless grapefruit entering the fresh 
market for each week of the 11 week period beginning the week of 
September 15. The rule limits the volume of sizes 48 and/or 56 red 
seedless grapefruit by establishing the weekly percentages at 50 
percent for the first three weeks (September 15 through October 5), 35 
percent for the next three weeks (October 6 through October 26), and 30 
percent for the remainder of the 11 weeks. Under such a limitation, the 
quantity of sizes 48 and/or 56 red seedless grapefruit that may be 
shipped by a handler during a particular week is calculated using the 
recommended percentage. By taking the recommended percentage times the 
average weekly volume of red grapefruit handled by such handler in the 
previous five seasons, the committee calculates a handler's weekly 
allotment of small sizes. This rule provides a supply of small sized 
red seedless grapefruit sufficient to meet market demand, without 
saturating all markets with these small sizes. This rule is necessary 
to help stabilize the market and improve grower returns.
    At the May 28, 1997, meeting, the committee recommended that the 
percentage for each of the 11 weeks be established at the 25 percent 
level. They reasoned that this percentage, when combined with the 
average weekly shipments for the total industry, would provide a total 
industry allotment of 244,195 cartons of sizes 48 and/or 56 red 
seedless grapefruit per regulated week. This percentage would have 
allowed total shipments of small red seedless grapefruit to approach 
the 250,000 carton mark during regulated weeks without exceeding it.
    The committee met again August 26, 1997, and revisited the weekly 
percentage issue. The committee recommended that the weekly percentages 
be set to 50 percent for the first three weeks (September 15 through 
October 5), 35 percent for the next three weeks (October 6 through 
October 26), and 30 percent for the remainder of the 11 weeks.
    In the discussion of this change, the committee reviewed the 
initial percentages recommended, the current state of the crop, and 
shipping information from past seasons. The committee recognized that 
in terms of available allotment, even establishing a weekly percentage 
of 25 percent for the first three regulated weeks would not be 
restrictive. Shipment data from the past four seasons indicate that 
available allotment under a 25 percent restriction would exceeded 
actual shipments for each of the first three weeks that are regulated 
under this rule.
    The committee determined that if available allotment would exceed 
shipments for the first three weeks even when establishing a percentage 
of 25 percent, it would give individual handlers greater flexibility 
during these three weeks to establish the percentage at 50 percent. 
They argued that this would provide each handler with additional 
allotment during these three weeks, reducing the number of loans and 
transfers needed to utilize the available allotment, yet having little 
or no affect on the volume of small sizes. The committee also agreed 
that setting the percentage at 50 percent would still provide some 
restriction should shipments for this period this season exceed past 
quantities.
    For the remainder of the 11 weeks, the committee believed that the 
weekly percentage needed to be tighter than 50 percent which would 
impose nearly no restriction but greater than 25 percent. The issue was 
raised regarding the possible market impact when small sizes exceed 
250,000 cartons in a week. The committee recognized that ideally, 
244,195 cartons of red seedless

[[Page 47918]]

grapefruit would be available to the industry for each of the 11 weeks 
if the percentage was set at 25 percent. However, the committee was 
concerned that the true amount available would be lower. Several 
members stated that setting a weekly percentage at 25 percent to 
approximate the 250,000 cartons was based on total utilization of 
allotment, and that assumption was unreasonable. The committee agreed 
that loans and transfers are beneficial, but that even with their 
availability a percentage of allotment would most likely not be used.
    Several other members raised concerns about focusing too much on 
total allotment available, rather than on allotment per handler. 
Members concurred that the season for red seedless grapefruit is 
approximately 33 weeks. However, this did not mean that every handler 
was shipping during all 33 weeks. Using 33 weeks to divide an average 
season to calculate an average week often resulted in amounts lower 
than their actual weekly shipments because they were not shipping 
during all 33 weeks. They stated that applying a 25 percent restriction 
regulated them at a level closer to 15 percent of their actual 
shipments during the regulation period.
    Based on this discussion, the committee thought a weekly percentage 
of 35 percent for the regulation weeks October 6 through October 26 
would be a more appropriate level. They believe that because total 
allotment will not be fully utilized and the way individual handlers 
are affected, this level would provide a sufficient supply of small 
sizes without overly exceeding amounts that would negatively affect 
other markets.
    The committee further recommended that the weekly percentage for 
the remainder of the 11 weeks be established at 30 percent. The 
committee resolved that moving into the last five weeks of regulation 
that a tighter percentage was desirable. The committee believed that as 
industry moves into the season and shipments increase, that a weekly 
percentage of 30 percent provides the best balance between supply and 
demand for small sized red seedless grapefruit.
    At the May 28, 1997, meeting, there was discussion regarding the 
expected impact of this change on handlers and growers in terms of 
cost. Discussion focused on the possibility that market share could be 
lost to Texas and that this rule could increase packinghouse costs. 
According to EAB, limiting shipments of small Florida grapefruit 
probably will not result in a major shift to Texas grapefruit because 
the Texas industry is much smaller and has higher freight costs to some 
markets supplied by Florida. The UF-IFAS study made similar findings. 
Texas production is much smaller and has been susceptible to freezes 
that take it out of the market. This has lessened its impact on the 
overall grapefruit market.
    The concern about packinghouse costs was that this action means 
lower packouts which may increase cost. However, the availability of 
loans and transfers provides some flexibility. Also, this rule only 
affects small sizes and only during the 11 week period. By substituting 
larger sizes and using loans and transfers, packouts should approach 
the weekly volume of seasons prior to this rule.
    A weekly percentage of 25 percent, when combined with the average 
weekly shipments for the total industry, would provide a total industry 
allotment of 244,195 cartons of sizes 48 and/or 56 red seedless 
grapefruit. Based on shipments from the past four seasons, a total 
available allotment of 244,195 cartons would exceed actual shipments 
for each of the first three weeks regulated under this rule.
    In addition, if a 25 percent restriction on small sizes had been 
applied during the 11 week period in the three seasons prior to last 
season, an average of 4.2 percent of overall shipments during that 
period would have been affected. This rule affects even fewer shipments 
by establishing less restrictive weekly percentages. In addition, a 
large percentage of this volume most likely could have been replaced by 
larger sizes. Under this rule a sufficient volume of small sized red 
grapefruit is still allowed into all channels of trade, and allowances 
are in place to help handlers address any market shortfall. Therefore, 
the overall impact on total seasonal shipments and on industry cost 
should be minimal.
    The committee also discussed the state of the market and the cost 
of doing nothing. During the past three seasons, sizes 48 and 56 
accounted for 34 percent of total shipments during the 11 week 
regulatory period, with the average weekly percentage exceeding 40 
percent of shipments. For the remainder of the season, sizes 48 and 56 
represent only 26 percent of total shipments. While there is a market 
for early grapefruit, the shipment of large quantities of small red 
seedless grapefruit in a short period oversupplies the fresh market for 
these sizes and negatively impacts the market for all sizes.
    The early season crop tends to have a greater percentage of small 
sizes. The large volume of smaller, lower priced fruit drives down the 
price for all sizes. Early in the season, larger sized fruit commands a 
premium price. In some cases, the f.o.b. is $4 to $6 a carton more than 
for the smaller sizes. In early October, the f.o.b. for a size 27 
averages around $10.00 per carton. This compares to an average f.o.b. 
of $5.50 per carton for size 56. By the end of the 11 week period 
outlined in this rule, the f.o.b. for large sizes has dropped to within 
two dollars of the price for small sizes.
    In the past three seasons, during the period covered by this rule, 
prices of red seedless grapefruit have fallen from a weighted average 
f.o.b. of $7.80 per carton to an average f.o.b. of $5.50 per carton. 
Even though later in the season the crop has sized to naturally limit 
the amount of smaller sizes available for shipment, the price structure 
in the market has already been negatively affected. This leaves the 
f.o.b. for all sizes around $5.00 to $6.00 per carton for the rest of 
the season.
    As previously stated, the on tree price of red seedless grapefruit 
has also been falling. On tree prices for fresh red seedless grapefruit 
have declined steadily from $9.60 per box during the 1989-90 season, to 
$3.11 per box during the 1992-93 season, to $1.82 per box during the 
1994-95 season, to $1.55 per box during the 1996-97 season. In many 
cases, prices during the past two seasons have provided returns less 
than production costs. This price reduction could force many small 
growers out of business. If no action is taken, the UF-IFAS study 
indicates that on tree returns will remain at levels around $1.50.
    This rule provides a supply of small sized red seedless grapefruit 
to meet market demand, without saturating all markets with these small 
sizes. The committee believes that if the supply of small sizes were 
limited early in the season, prices can be stabilized at a higher 
level. This provides increased returns for growers. In addition, if 
more small grapefruit were allowed to remain on the tree to increase in 
size and maturity, it could provide greater returns to growers.
    The committee surveyed shipment data covering the 11 week 
regulatory period for the last four seasons and examined tables 
outlining weekly f.o.b. figures for each size. The committee believes 
that if shipments of small sizes can be maintained at around 250,000 
cartons a week, prices should stabilize and demand for larger, more 
profitable sizes should increase. The established weekly percentages, 
when combined with the average weekly shipments for the total industry, 
should help maintain industry shipments of sizes 48 and/or 56 red 
seedless grapefruit at quantities

[[Page 47919]]

close to the 250,000 carton level per regulated week. A stabilized 
price that returns a fair market value benefits both small and large 
growers and handlers.
    This rule may require more selective picking of only the sizes 
desired, something that many growers are doing already. The UF-IFAS 
study indicated that returns could increase if growers harvest 
selectively and return to repick groves as the grapefruit sized. This 
also allows growers to maximize returns on fresh grapefruit by not 
picking unprofitable grades and sizes of red grapefruit that are sent 
to the less profitable processing market. The study indicated that 
selective harvesting can reduce the f.o.b. cost per carton. The study 
also indicates that increasing minimum size restrictions could help to 
raise returns.
    Fifty-nine percent of red seedless grapefruit is shipped to fresh 
market channels. There is a processing outlet for grapefruit not sold 
into the fresh market. However, the vast majority of processing is 
squeezing the grapefruit for juice. Because of the properties of the 
juice of red seedless grapefruit, including problems with color, the 
processing outlet is limited, and not currently profitable. Therefore, 
it is essential that the market for fresh red grapefruit be fostered 
and maintained. Any costs associated with this action are only for the 
11 week regulatory period. However, benefits from this action could 
stretch throughout the entire 33 week season. Even if this action was 
successful only in raising returns a few pennies a carton, when applied 
to 34 million cartons of red seedless grapefruit shipped to the fresh 
market, the benefits should more than outweigh the costs.
    The limits established under this action are based on percentages 
applied to a handler's average week. This process was established by 
the committee because it was the most equitable. All handlers have 
access to loans and transfers. Handlers and growers both will benefit 
from increased returns. The costs or benefits of this rule are not 
expected to be disproportionately more or less for small handlers or 
growers than for larger entities.
    The committee discussed alternatives to this action. The committee 
discussed eliminating shipments of size 56 grapefruit all together. 
Several members expressed that there is a market for size 56 
grapefruit. Members favored the percentage rule recommended because it 
supplies a sufficient quantity of small sizes should there be a demand 
for size 56. Therefore, the motion to eliminate size 56 was rejected. 
Another alternative discussed was to do nothing. However, the committee 
rejected this option, taking in account that returns would remain 
stagnant without action. Thus, the majority of committee members agreed 
that weekly percentages should be established as recommended for the 
shipment of small sized red seedless grapefruit for the 11 week period 
beginning September 15, 1997.
    This rule changes the requirements under the Florida citrus 
marketing order. Handlers utilizing the flexibility of the loan and 
transfer aspects of this action are required to submit a form to the 
committee. The rule increases the reporting burden on approximately 80 
handlers of red seedless grapefruit who will be taking about 0.03 hour 
to complete each report regarding allotment loans or transfers. The 
information collection requirements contained in this section have been 
approved by the Office of Management and Budget (OMB) under the 
provisions of the Paperwork Reduction Act of 1995 (Pub. L. 104-13) and 
assigned OMB number 0581-0094. As with all Federal marketing order 
programs, reports and forms are periodically reviewed to reduce 
information requirements and duplication by industry and public sector 
agencies.
    As noted in the initial regulatory flexibility analysis, the 
Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this rule. However, red seedless 
grapefruit must meet the requirements as specified in the U.S. 
Standards for Grades of Florida Grapefruit (7 CFR 51.760 through 
51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 
1621 through 1627). Further, the public comments received concerning 
the proposal did not address the initial regulatory flexibility 
analysis.
    In addition, the committee meetings were widely publicized 
throughout the citrus industry and all interested persons were invited 
to attend the meeting and participate in committee deliberations on all 
issues. Like all committee meetings, the May 28, 1997, meeting and the 
August 26, 1997, meeting were public meetings and all entities, both 
large and small, were able to express views on this issue.
    A proposed rule concerning this action was published in the Federal 
Register on Tuesday, July 29, 1997 (62 FR 40482). Copies of the rule 
were mailed or sent via facsimile to all committee members and to 
grapefruit growers and handlers. The rule was also made available 
through the Internet by the Office of the Federal Register.
    A 15-day comment period was provided to allow interested persons to 
respond to the proposal. Fifteen days was deemed appropriate because 
this rule needs to be in place as soon as possible since handlers begin 
shipping grapefruit in September and handlers need time to consider 
their allotment and how best to service their customers. The comment 
period ended August 13, 1997. Thirty five comments were received.
    As previously stated, subsequent to the end of the comment period, 
the committee met and recommended modifying its original 
recommendation. The committee recommended that the weekly percentages 
be changed from 25 percent for each of the 11 regulated weeks to 50 
percent for the first three weeks (September 15 through October 5), 35 
percent for the next three weeks (October 6 through October 26), and 30 
percent for the remainder of the 11 weeks. Because of this 
recommendation, the Department has determined that interested parties 
should be provided the opportunity to comment on the changes to the 
original recommendation. However, the Department has further determined 
that extending the comment period with no percentages in effect 
limiting the shipments of small red seedless grapefruit when the period 
of regulation begins would be detrimental to the industry. Therefore, 
the Department is instituting the regulations on small red seedless 
grapefruit through this interim final rule which will allow 10 
additional days to comment. The discussion on the comments to the 
proposed rule follow.
    Thirty-five comments were received, twenty-four in favor and eleven 
in opposition to the proposed rule. Three additional comments in favor 
of the proposed rule were received after the closing date for comments. 
The vast majority of the points made by the commenters were thoroughly 
discussed prior to the committee vote.
    The manager of the committee submitted a comment to the proposed 
rule. It stated that the committee went to great lengths to ensure that 
the entire Florida citrus industry had an opportunity to discuss or 
comment on this rule. The committee met three times in a sixty day 
period to review and consider this rule. This included a meeting where 
an economic study on the grapefruit industry prepared by UF-IFAS was 
presented. The comment stated that after these meetings and discussion 
the committee voted to implement a weekly percentage for each week in 
the regulatory period. The comment further stated that this action was 
considered and recommended by the Florida Citrus Commission and its

[[Page 47920]]

appointed subcommittee the Grapefruit Advisory Council. The comment 
also affirmed that prior to the May 28, 1997, committee meeting, all 
Florida fresh citrus fruit shippers were notified of their average 
weekly base.
    In their comments, most of the producers and handlers supporting 
the rule confirmed their support for the need to regulate the volume of 
small sizes this season. Many referenced the procedures established to 
regulate the small sizes in their comments, indicating that they 
contributed to the support of this regulation.
    Fifteen commenters stated specifically that the over shipment of 
small sizes early in the season has resulted in reduced prices. Eleven 
comments expressed that this regulation brings the early volume of 
small size red grapefruit to levels similar to weekly shipments during 
most of the season. Nine commenters wrote that total industry shipments 
average around one million cartons per week, and that during the 
regular part of the season, small sizes account for around 25 percent 
of shipments or 250,000 cartons. This regulation limits early shipments 
of small sized red seedless grapefruit to levels close to this amount. 
Six commenters further stated that the regulatory period was the 
appropriate length, ending as shipments begin to adjust naturally due 
to the fruit sizing.
    Many commenters discussed the market stabilizing benefits they 
expect from of this regulation. Five comments stated that this action 
will dampen spikes in the levels of shipments that lead to predatory 
pricing. Five also stated that this action will provide steadier, more 
balanced marketing that is less disruptive to markets. Four commenters 
expressed that with the regulation in place, there will be a good flow 
of all sizes to market.
    The comments also discussed the fairness of the rule. Seven 
commenters contended that this action is fair to all growing areas and 
shippers. Several of the commenters favoring this action stated they 
had groves in more than one growing region. They said they did not 
believe this action benefited one area at the expense of another. 
Another commenter stated that the regulation affects part and only part 
of everyone's shipments. Ten referenced the use of an average week as 
promoting fairness. They stated that this provided allotment to all 
shippers, not just those who had shipped early in the past, thus giving 
everyone allotment to service the early markets. Seven expressed that 
the availability of transfers will also help spread allotment to those 
who need it. Seven comments also asserted that this action will not be 
unfair to consumers.
    Several comments inferred that this regulation actually promotes 
fairness. Five commenters believe this regulation will prevent the 
oversupply of small sizes early that negatively affects prices before 
the majority of growers are in the market. Two comments said the rule 
will help address to beat the crowd mentality of pushing fruit on to 
the market. This regulation may help stabilize prices, providing better 
returns throughout the season, and benefiting all growers, not just 
those in the market early.
    Several comments indicated that this regulation will make growers 
plan ahead on what is harvested. Three comments stated they have 
already been holding back on picking sizes 48 and 56, allowing them to 
size. They said this has enabled them to provide larger, higher quality 
fruit to their customers. Two of the three stated specifically that 
selective picking has resulted in better returns. Two additional 
commenters also stated that they have been using spot picking 
effectively.
    The remaining eleven commenters raised several issues opposing the 
limitation of small sizes. Many commenters who raised objections to 
this action posed concerns regarding the possible loss of markets and 
the impact the rule will have on different regions of the production 
area. Each issue raised is addressed herein.
    Eight of the comments received opposing this action stated that 
there are strong markets for small sizes, particularly in the export 
markets. Many of these commenters believe that this rule will keep 
Florida from being able to service these markets and that they will be 
lost to Texas and foreign competitors. These concerns were raised and 
discussed at the committee meeting.
    As stated above, the purpose of this regulation is not to eliminate 
the marketing of sizes 48 and 56, but rather to prevent the 
overshipment of such sizes from saturating all markets. In making its 
recommendations, the committee recognized that markets exist for small 
sizes. That is why they recommended limiting the volume of small sizes 
instead of eliminating them. In making its recommendation for a weekly 
percentage of size, the committee considered the markets available for 
small sizes and set a weekly percentage sufficient to address these 
markets. They also considered what percentage of the volume did small 
sizes represent during most of the season. They used this information 
to recommend a weekly percentage for each of the regulated weeks.
    Sales of smaller sizes continue throughout the season, with certain 
markets preferring the small sizes. Examining the demand for small 
sizes across the season gives a picture of the level of that demand. 
During most of the season, sizes 48 and 56 represent only 26 percent of 
total shipments. Comments received stated that total industry shipments 
average around one million cartons per week, and that during most of 
the season, small sizes account for around 25 percent of shipments or 
250,000 cartons. However, sizes 48 and 56 accounted for 34 percent of 
total shipments during the 11 week regulatory period the past three 
seasons, with the average weekly percentage exceeding 40 percent of 
shipments.
    The weekly percentages, when combined with the average weekly 
shipments for the total industry, provide for a total weekly industry 
allotment of sizes 48 and/or 56 red seedless grapefruit per regulated 
week. A weekly percentage of 26 percent, the percentage of small sizes 
to total shipments during most of the season, would provide a weekly 
allotment of about 254,000 cartons. The established percentages provide 
additional cartons above this amount, allowing the industry to service 
the markets for small sizes while providing restrictions to prevent 
total saturation of all markets with these sizes. The established 
percentages will help bring the early volume of small size red 
grapefruit to levels similar to weekly shipments during most of the 
season.
    In terms of exports of red seedless grapefruit, volume has averaged 
around 3,779,650 cartons from September through November. Based on 
information available on sizes exported, on average 43 percent of the 
exports from the Interior region are larger than size 48, and 61 
percent of the exports from the Indian River region are larger than 
size 48. Total allotment available during the 11 weeks as established 
by the percentages in this rule exceed the average volume of exports 
during the regulation period. Considering the export data from these 
two regions, and the fact that the Indian River region accounted for 74 
percent of exports during the 11 week period this past season, the 
allotment of small sizes provided under this rule should be sufficient 
to service export demand for small sizes.
    In addition, in the three seasons prior to last season, if a 25 
percent restriction on small sizes had been applied during the 11 week 
period, only an average of 4.2 percent of overall shipments during that 
period would have been affected. This rule establishes less restrictive

[[Page 47921]]

weekly percentages and will affect even fewer shipments. In addition, a 
large percentage of this volume most likely could have been replaced by 
larger sizes. Thus, the available allotment should be sufficient to 
address the demand for small sizes, allowing Florida to maintain those 
markets.
    The provisions of this rule also provide for overshipments, loans 
and transfers. These allowances are provided to move allotment to those 
who have markets for smaller grapefruit. Any shortage an individual 
handler might have in allotment may be filled by loan or transfer. The 
committee discussion also indicated that markets that normally demand 
small sizes have shown a willingness to purchase larger sizes. 
Therefore, a sufficient volume of small sized red grapefruit should be 
available for all channels of trade, and allowances are in place to 
help handlers address their specific market needs.
    In regards to Texas or foreign competitors taking markets from 
Florida, available information indicates that this should not be a 
significant problem. As mentioned earlier, according to EAB, limiting 
shipments of small Florida grapefruit would probably not result in a 
major shift to Texas grapefruit because the Texas industry is much 
smaller and would have higher freight costs to some markets supplied by 
Florida. The UF-IFAS study made similar findings. Texas production is 
much smaller and has been susceptible to freezes that take it out of 
the market. This has lessened its impact on the overall grapefruit 
market. In terms of foreign competition, the UF-IFAS study determined 
that current foreign competition is minimal. It also infers that even 
in cases of tightened standards, foreign competitors are not likely to 
take market share from Florida.
    Four comments asserted that the market forces of supply and demand 
should be relied upon to regulate the market. The declaration of policy 
in the Act includes a provision concerning establishing and maintaining 
such orderly marketing conditions as will provide, in the interests of 
producers and consumers, an orderly flow of the supply of a commodity 
throughout the normal marketing season to avoid unreasonable 
fluctuations in supplies and prices. As previously stated, during the 
11 week period of regulation, prices have dropped considerably. This is 
thought to stem from an oversupply of small sizes early in the season.
    Limiting the quantity of small red seedless grapefruit that 
handlers may handle early in the season is expected to contribute to 
the Act's objectives of orderly marketing and improving producers' 
returns. This regulation provides a practical system to control the 
volume of small red seedless grapefruit early in the season, reducing 
gluts of small sizes, enhancing producer returns and stabilizing the 
markets for all sizes. Thus, the rule promotes orderly marketing by 
avoiding price-depressing oversupplies of small sizes during the first 
few months of the season when supplies are heaviest.
    Four comments stated that the benefits of this rule are regional. 
Two comments alleged that this rule benefits one growing area at the 
expense of another. They state that fruit grown in the Gulf region 
reaches maturity before other areas in the State. One comment attested 
that past seasonal data indicates that in some years, the Gulf area 
represents 90 percent of shipments during the first week of the 
regulation period, and 50 percent of shipments during the first three 
weeks. The commenter stated further that cutting three-quarters of 
their shipping volume will significantly reduce their returns.
    As previously stated, this rule limits the volume of small sizes 
that can be shipped during the first 11 weeks of a season. The rule 
only affects sizes 48 and/or 56, there are no restrictions on large 
sizes. Because of the way allotment is calculated, shipments from past 
seasons indicate that there will be more allotment available during the 
first three weeks of the regulation period than there are shipments of 
small sizes. Therefore, regardless of a handler's location, with the 
availability of loans and transfers, their shipments should not be 
restricted during these first three weeks, even if their entire supply 
consists of small sizes.
    One of the comments alleges that growers in other regions, 
particularly the Indian River area, realize that there is a market for 
small sizes, and the 11 week period was established to prevent Gulf 
growers from selling their small sizes early in the season. The 
commenter contends the other areas support this rule because they want 
the opportunity to sell these sizes when their fruit matures.
    Again, this regulation only limits the volume of small sizes, it 
does not eliminate them. There are no restrictions on large sizes. With 
their allotment, and the availability of loans and transfers, handlers 
should be able to address the markets demanding small sizes.
    In terms of maturity, the Gulf area is normally the first region to 
begin shipping. During the weeks in September, they do represent the 
majority of domestic shipments. However, when total shipments, domestic 
and export are considered, the Indian River area has averaged similar 
or higher shipments than the Gulf in September the past three seasons. 
In October and November, both of which are included in this regulation, 
the shipping totals from the Indian River area substantially exceed the 
totals from other regions. The shipment figures do not support the 
claims of regional inequity.
    Several comments expressed how profitable the early markets are due 
to the high prices available during the early season. This regulation 
is not an attempt to keep individuals from taking advantage of these 
markets. The goal of this rule is to control the volume of small sizes 
to keep them from saturating all markets and dragging down prices. By 
doing so, this action may buoy prices providing better returns 
throughout the season, not just during the first three weeks.
    Granted, there is a profitable market for small sizes early in the 
season. However, there is an opportunity for those that do not market 
responsibly to dump small sizes on the market, early in the season. 
This appears to be occurring presently. The red seedless grapefruit 
season is longer than a few weeks. Taking profits early in the season 
at the expense of far lower returns for the remainder of the season 
does not provide for orderly marketing or reasonable returns to 
growers. The Department must consider the situation of all growers 
covered under the order. It is in the interest of all areas that 
adequate funds are returned to the grower throughout the season. This 
is best accomplished by providing stable, reasonable returns throughout 
the season.
    Another comment argued that the vote of the committee signals a 
lack of consensus on this issue and the industry is not united in its 
support. In the marketing order, the voting requirements necessary to 
recommend regulation are clearly stated. The order states that for any 
decision or recommendation of the committee to be valid, ten concurring 
votes, five of which must be grower votes, shall be necessary. The 
committee vote supporting this regulation met these requirements. In 
terms of industry support, all industry members had ample opportunity 
to express their opinions on this issue. The Department considered all 
views expressed prior to instituting this interim final rule.
    One commenter stated that there are seasons when there are no large 
sizes available during the early season. The committee meets each 
season to consider implementing the procedures

[[Page 47922]]

to control the volume of small sizes early in the season. One of the 
things the committee considers, is the status of the crop in terms of 
size. In seasons where fruit is running small, the committee could 
establish a higher percentage to allow for more small sizes or choose 
not to establish regulation. In the case of this season, the committee 
indicated that fruit was sizing well. However, if there is a change in 
the status of the fruit or the market, the committee could meet and 
vote to increase the percentage to allow for more small sizes, or 
eliminate the regulation altogether.
    This same commenter also asserts that enforcing this rule will 
create an administrative problem and will create a market for 
allotment. The committee staff has already calculated and distributed 
the allotment for each handler. Information supplied by the Federal 
State Inspection Service will be used to determine compliance with this 
rule. Violators will be subject to the penalties provided for under the 
Act. The committee staff will also collect information regarding loans 
and transfers. It is expected that allotment itself should not have a 
monetary value, although it certainly may be transferred and loaned 
between handlers.
    In another comment, a handler stated that they have a 
responsibility to their stockholders, and that running its facility at 
maximum volume provides them a higher return on their dollar. A handler 
that charges growers per field box does increase its revenue by 
handling the greatest number of boxes it can. The Department takes into 
account all those affected by a particular action. However, the order 
benefits growers through orderly marketing and improved returns. This 
rule is an attempt to do both. The purpose of this rule is to limit the 
volume of small sizes marketed early in the season. In the three 
seasons prior to last season, if a 25 percent restriction on small 
sizes had been applied during the 11 week period, only an average of 
4.2 percent of overall shipments during that period would have been 
affected. This rule establishes less restrictive weekly percentages and 
will affect even fewer shipments. In addition, a large percentage of 
this volume most likely could have been replaced by larger sizes. A 
sufficient volume of small sized red grapefruit is still allowed into 
all channels of trade, and allowances are in place to help handlers 
address any market shortfall.
    Several comments said that increasing standards will raise the 
amount of fruit that does not meet the requirements to be packed fresh, 
thereby increasing eliminations going to the processor and lowering 
grower returns. This rule controls the volume of small sizes. It is 
only in effect during the first 11 weeks of the season. As some 
comments to this rule stated, it may cause growers to plan their 
harvest. If a grove has a significant amount of small sizes, it may 
benefit the grower to delay harvesting until the fruit sizes. Several 
comments stated that they had used this selective picking successfully 
in the past.
    Another option considered by the commenter would be to spot pick, 
but he stated that was expensive. However, two comments received on 
this rule were from growers who are using spot picking effectively. 
Also, information provided by the UF-IFAS study indicated that it would 
increase returns if growers would harvest selectively and return to 
repick groves as the grapefruit sized. Growers could maximize returns 
on fresh grapefruit by not picking unprofitable grades and sizes of red 
grapefruit that will be sent to the less profitable processing market. 
The study also indicated that selective harvesting can reduce the 
f.o.b. cost per carton, and increase packout rates over clean 
harvesting.
    Another comment stated that this rule will make the current 
problems with grapefruit worse. It said the rule will decrease the 
market window, further depressing prices. It also said that this action 
will increase the total volume by people picking large sizes and 
allowing small fruit to size, thereby increasing the total number of 
boxes available later in the season when prices barely cover costs. 
This regulation does not shorten the marketing window. The rule 
provides for a sufficient amount of small sizes and places no 
restrictions on larger sizes. This action should improve returns on all 
sizes. In addition, allowing the fruit to size, could increase returns 
as larger sizes can yield higher returns.
    One comment expressed that a restriction of shipments of sizes 48 
and 56 will put an upward pressure on price. The comment said this 
would be bad for the consumer. The EAB reviewed this comment and 
determined that it is true that retail prices tend to track f.o.b. 
prices. However, variations do appear where there are other factors 
that influence retail prices including transportation and marketing 
costs, the price situation with competitive fruits, changes in consumer 
preferences, and marketing strategies of individual retail operations. 
No undue price enhancement is expected as a result of this rule. 
Consumers will benefit from the rule because fewer small fruits will be 
shipped, resulting in larger, more mature fruit available to the 
consumer. Additionally, the profitability of grower operations will be 
improved, helping to maintain a competitive environment for marketing, 
to the benefit of consumers.
    Also, the f.o.b. price would need to rise considerably to have a 
significant impact on the consumer. Even if this regulation was 
successful in maintaining the f.o.b. price at one dollar above the 
average f.o.b. price from this past season, such an increase would 
translate into an increase of a few cents per fruit. However, this same 
increase would provide an additional return of a dollar per carton to 
the grower. This increase could be the difference between profit and 
loss.
    The comment also states that restrictions should not be applied 
when prices are above parity. Parity, as calculated by the National 
Agricultural Statistics Service, was $12.03 for the 1996-97 season. The 
preliminary calculation of parity for the 1997-98 season is $10.43. At 
the beginning of the season, high prices are available. However, the 
prices quickly drop as the volume of shipments increase. The purpose of 
this rule is to stabilize prices, so that the price, even though it 
declines, will be maintained at a higher level. This rule should not 
elevate prices to levels above parity. If it were to maintain prices at 
a level greater than parity, the Department would review the situation 
and revise or modify the regulation.
    One comment questioned the accuracy of references made in the rule 
in terms of on tree prices. The commenter stated that on tree returns 
should have been used. The comment also stated that it was not clear 
whether the figures were stated in boxes (1\3/5\ bushels) or cartons 
(\4/5\ bushels). It also stated that the 1989-90 numbers were unusually 
high due to a freeze, and that numbers were missing for the 1995-96 
season.
    The on tree prices referenced in the rule are from the Florida 
Agricultural Statistics Service. The prices were attributed to cartons 
in the proposed rule. The prices should have been attributed to boxes. 
This has been corrected, and the figures updated. These figures were 
chosen to demonstrate the current status of the industry. A similar 
portrait could have been painted using on tree returns as suggested by 
the comment. On tree returns were $6.87 per box in 1991-92, $3.38 per 
box in 1993-94, and were $1.21 per box for the 1995-96 season. The on 
tree price information for the 1995-96 season is $1.71 per box.
    This same comment stated that the cause of the decrease in price 
throughout the season is a result of total

[[Page 47923]]

volume, not the amount of small sizes shipped early in the season. The 
Department recognizes that there are several factors contributing to 
the current problems facing the grapefruit industry. However, this rule 
is not an attempt to fix every potential problem. Rather, this rule 
seeks to slow the drastic price decline that occurs during the 11 weeks 
regulated hereunder. The early season crop tends to have a greater 
percentage of small sizes. The large volume of smaller, lower priced 
fruit drives down the price for all sizes.
    Larger sized fruit commands a premium price early in the season. 
The f.o.b. for these sizes can be $4 to $6 a carton more than for the 
smaller sizes. In early October, the f.o.b. for a size 27 averages 
around $10.00 per carton, compared to an average f.o.b. of $5.50 per 
carton for size 56. By the end of the 11 week period in this rule, the 
f.o.b. for large sizes has dropped to within two dollars of the price 
for small sizes. In addition, during the 11 week period, prices of red 
seedless grapefruit have fallen from a weighted average f.o.b. of $7.80 
per carton to an average f.o.b. of $5.50 per carton, the f.o.b. for 
size 56, for the past three seasons.
    Later in the season the crop tends to naturally limit the amount of 
smaller sizes available for shipment. However, the price structure in 
the market has already been negatively affected, and the f.o.b. price 
for all sizes remains around $5.00 to $6.00 per carton for the rest of 
the season.
    In addition, the committee examined shipment information detailing 
the amounts and percentages of sizes 48 and 56 shipped during the 11 
week regulatory period for the last four seasons. They compared this 
information with tables outlining weekly f.o.b. figures for each size. 
Based on this statistical information from past seasons, the committee 
members believe there is an indication that once shipments of sizes 48 
and 56 reach levels above 250,000 cartons a week, prices decline on 
those and most other sizes of red seedless grapefruit. The committee 
believes that if shipments of small sizes can be maintained at around 
250,000 cartons a week, prices should stabilize and demand for larger, 
more profitable sizes should increase.
    Utilizing these procedures contributes to the Act's objectives of 
orderly marketing and improving producers' returns. According to EAB, 
since sizes 48 and 56 red grapefruit are a small part of the total 
supply of Florida red grapefruit, limiting shipments of these sizes 
will have a moderate effect on the total quantity shipped. It may, 
however, help to prevent the average price for all Florida red 
grapefruit from being reduced to below the cost of production. This 
rule limitation provides a sufficient supply of small sized red 
seedless grapefruit to meet market demand, without saturating all 
markets with these small sizes. This should help stabilize prices for 
all sizes.
    After thoroughly analyzing the comments received and other 
available information, including the additional recommendation by the 
committee, the Department has concluded that this interim final rule is 
appropriate.
    A 10-day comment period is provided to allow interested persons to 
respond to this proposal. Ten days is deemed appropriate because the 
regulation period begins on September 15, 1997, and continues for 11 
weeks. Adequate time will be necessary so that any changes made to the 
regulations based on comments filed could be made effective during the 
11-week period. All written comments timely received will be considered 
before a final determination is made on this matter.
    After consideration of all relevant matter presented, including the 
information and recommendations submitted by the committee and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found and determined upon good cause that it is 
impracticable, unnecessary, and contrary to the public intent 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 (5 U.S.C. 553) 
because this rule needs to be in place when handlers begin shipping 
grapefruit in September. This rule is necessary to help stabilize the 
market and to improve grower returns. Further, handlers are aware of 
this rule, which was recommended at public meetings. Also, a 15-day 
comment period was provided for in the proposed rule and a 10-day 
comment period is provided in this rule.

List of Subjects in 7 CFR Part 905

    Grapefruit, Marketing agreements, Oranges, Reporting and 
recordkeeping requirements, Tangelos, Tangerines.

    For the reasons set forth in the preamble, 7 CFR part 905 is 
amended as follows:

PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN 
FLORIDA

    1. The authority citation for 7 CFR part 905 continues to read as 
follows:

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

    2. In Sec. 905.306, paragraphs (a) and (b), the word ``During'' is 
removed and the words ``Except as otherwise provided in Sec. 905.601, 
during'' are added in its place.
    3. A new Sec. 905.601 is added to read as follows:

    Note: The following section will not appear in the Code of 
Federal Regulations.

Sec. 905.601  Red seedless grapefruit regulation 101.

    The schedule below establishes the weekly percentages to be used to 
calculate each handler's weekly allotment of small sizes. If the 
minimum size in effect under section 905.306 for red seedless 
grapefruit is size 56, handlers can fill their allotment with size 56, 
size 48, or a combination of the two sizes such that the total of these 
shipments are within the established weekly limits. If the minimum size 
in effect under section 905.306 for red seedless grapefruit is 48, 
handlers can fill their allotment with size 48 red seedless grapefruit 
such that the total of these shipments are within the established 
weekly limits. The weekly percentages for sizes 48 and/or 56 red 
seedless grapefruit grown in Florida, which may be handled during the 
specified weeks are as follows:

------------------------------------------------------------------------
                                                                Weekly  
                            Week                              percentage
------------------------------------------------------------------------
(a) 9/15/97 through 9/21/97.................................         50 
(b) 9/22/97 through 9/28/97.................................         50 
(c) 9/29/97 through 10/5/97.................................         50 
(d) 10/6/97 through 10/12/97................................         35 
(e) 10/13/97 through 10/19/97...............................         35 
(f) 10/20/97 through 10/26/97...............................         35 
(g) 10/27/97 through 11/2/97................................         30 
(h) 11/3/97 through 11/9/97.................................         30 
(i) 11/10/97 through 11/16/97...............................         30 
(j) 11/17/97 through 11/23/97...............................         30 
(k) 11/24/97 through 11/30/97...............................         30 
------------------------------------------------------------------------

    Dated: September 9, 1997.
Robert C. Keeney,
Director, Fruit and Vegetable Division.
[FR Doc. 97-24307 Filed 9-11-97; 8:45 am]
BILLING CODE 3410-02-U