[Federal Register Volume 62, Number 227 (Tuesday, November 25, 1997)]
[Rules and Regulations]
[Pages 62689-62693]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30965]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 729

Commodity Credit Corporation

7 CFR Parts 1421 and 1446

RIN 0560-AFO1


1997-Crop Peanuts; National Poundage Quota; National Average 
Support Level for Quota and Additional Peanuts; and Minimum Commodity 
Credit Corporation Export Edible Sales Price for Additional Peanuts

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


[[Page 62690]]


ACTION: Final rule.

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SUMMARY: The purpose of this final rule is to codify determinations 
made by the Secretary of Agriculture (Secretary) with respect to the 
1997 peanut crop: the national poundage quota for quota peanuts is 
established at 1,133,000 short tons (st); the national average support 
level for quota peanuts is $610 per st; the national average support 
level for additional peanuts is set at $132 per st; and the minimum 
Commodity Credit Corporation (CCC) export edible sales price for price-
support loan-inventory additional peanuts is $400 per st. The poundage 
quota is established pursuant to statutory requirements contained in 
the Agricultural Adjustment Act of 1938, as amended (the 1938 Act). The 
determination of the national average support levels for quota and 
additional peanuts was made pursuant to the statutory requirements of 
the Federal Agriculture Improvement and Reform Act of 1996 (the 1996 
Act). The determination and announcement of the minimum export edible 
sales price for additional peanuts is a discretionary action made to 
facilitate the negotiation of private contracts for export edible 
peanuts. This rule also codifies the additional peanut price support 
determinations for the 1996 crop and the minimum CCC price for loan 
inventory additional peanuts from the 1996 crop.

EFFECTIVE DATE: November 25, 1997.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Robison, USDA, Farm Service 
Agency, STOP 0514, 1400 Independence Avenue, S.W., Washington, DC 
20250-0514, telephone 202-720-9255. Copies of the cost-benefit 
assessment prepared for this rule can be obtained from Mr. Robison.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be significant for purposes 
of Executive Order 12866 and, therefore, has been reviewed by OMB.

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 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this final rule do not preempt State 
laws, are not retroactive, and do not involve administrative appeals.

Paperwork Reduction Act

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

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this final rule because the Farm Service Agency (FSA) is 
not 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.

Unfunded Federal Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandate Reform Act (UMRA), for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
UMRA.

Background

A. Announcement of the Quota

    Section 358-1(a)(1) of the 1938 Act as amended by the 1996 Act, 
requires that the national poundage quota for peanuts for each of the 
1996 through 2002 marketing years (MYs) be established by the Secretary 
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 
(excluding seed) and related uses. As to seed, section 358-1(b)(2)(B) 
of the 1938 Act provides that a temporary allocation of quota pounds 
for the MY only 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. The MY for 
1997-crop peanuts runs from August 1, 1997, through July 31, 1998. 
Poundage quotas for the 1996 and 1997 crops of peanuts were approved by 
97 percent of peanut producers voting in a referendum conducted 
December 11-14, 1995.
    The national poundage quota for the 1997 MY was established at 
1,133,000 st, based on the following data.

Estimated Domestic Edible and Related Uses for 1997-Crop Peanuts

------------------------------------------------------------------------
                                                                Farmer  
                                                                stock   
                            Item                              equivalent
                                                                (short  
                                                                tons)   
------------------------------------------------------------------------
Domestic edible--Domestic production:                                   
   For domestic food use...................................      913,000
  On-farm and local sales..................................        9,000
Related uses:                                                           
  Crushing residual........................................      120,500
  Shrinkage and other losses...............................       36,500
Segregation 2 and 3 loan: Transfers to quota loan..........        5,000
Under production...........................................       49,000
                                                            ------------
    Total..................................................    1,133,000
------------------------------------------------------------------------

    The estimate of MY 1997 domestic food use of peanuts was developed 
in two steps. First, the farmer stock equivalent 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 358e of the 1938 Act as being made 
from additional peanuts. MY 1997 farm use and local sales were 
estimated at 1 percent ICEC's MY 1997 production estimate. This 
percentage reflects the average difference between USDA production data 
and Federal-State Inspection Service inspection data. About one-half of 
farm use and local sales is allocated to food use and the remainder to 
seed, and seed is excluded from quota determinations under amendments 
to the 1938 Act by the 1996 Act.
    The crushing residual represents the farmer stock equivalent weight 
of crushing grade kernels shelled from quota peanuts. In any given lot 
of farmer stock peanuts, a portion of such peanuts is only suitable for 
the crushing market. The quota consists of the edible and crushing 
content of the farmer stock weight of quota peanuts. 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 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 food use. The utilized 
factor is a FSA estimate equal to the

[[Page 62691]]

minimum allowable shrinkage used in calculating a handler's obligation 
to export or crush additional peanuts as set forth in Section 
359e(d)(2)(iv) of the 1938 Act. Excessive moisture and weight loss due 
to foreign material in delivered farmer stock peanuts were not 
considered since such factors are accounted for as inspection factors 
at buying points and do not impact quota marketing tonnage.
    The adjustment for Segregation 2 and 3 loan transfers 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 
at the quota loan rate, if it were not for quality problems. In such 
cases, for price support purposes only, these peanuts may be pledged as 
collateral for price support loans at a discounted quota loan rate. 
Subject to a national limit of 5,000 st, individual producers can 
transfer up to 25 percent of their effective farm poundage quota from 
the additional loan pool and receive 70 percent of the quota loan rate. 
Regarding the disposition of such peanuts, the CCC will ensure that 
they are crushed for oil.
    In addition, an allowance has been made for underproduction. 
Historically, only 92 percent of the quota has been marketed. Since the 
1996 Act eliminated the carryover of unmarketed quota pounds, any quota 
pounds not marketed will be a loss of potential income for producers. 
It is expected that somewhat more than 92 percent will be marketed. It 
was assumed, based on a consideration of all factors, that 95.5 percent 
of the 1997 quota will be marketed. This assumption, together with 
expected growth in domestic consumption of peanut products through new 
uses and a small increase in demand because of lower peanut support 
prices resulted in the setting of a national peanut poundage quota of 
1,133,000 st for the 1997 MY. This determination followed the 
publication of a proposed rule on November 25, 1996, in the Federal 
Register (61 FR 59840), which set forth a proposed MY 1997 national 
poundage quota level, an additional price support level and a minimum 
CCC sales price for export edible peanuts for sales of price support 
loan peanuts of the 1997 crop.
    There were 169 letters received comprising 63 separate comments in 
response to the notice during the comment period that ended on December 
10, 1996. The 63 comments addressing these issues represent 29 
manufacturers, 18 Associations, five Members of Congress, four 
producers, four shellers, and the three producer owned cooperatives 
that administer the loan program. The manufacturers and their 
associations were concerned with adequate supplies and stock levels. 
Manufacturers and their associations mostly recommended quota levels 
ranging from 1,400,000 to 1,500,000 st for MY 1997. Shellers and their 
associations were concerned with adequate supplies and competitive 
prices for export edible peanuts. Producers and their associations were 
concerned with supplies, stock levels and program costs. The 
Congressional letters counseled the Secretary to be thorough and 
cautious in setting the 1997 national peanut poundage quota.
    A significantly larger quota recommended by most peanut product 
manufacturers would lower the price received by first buyers and could 
slightly reduce cost to consumers for peanut products. Furthermore, a 
substantial increase in quota would lower the average producer price to 
a level near the average national support price. A quota of 1,400,000 
to 1,500,000 st 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 st. Since 
the demand for greater supplies of peanuts is small, this level of 
quota would likely result in a surplus and a loss on loan placements 
for more than 300,000 st of peanuts. These peanut losses would be 
around $400 per st. Losses of up to $120 million could occur and result 
in producer assessments of over $100 per st the following year. This 
level of assessment could lower the effective price received by 
producers for quota peanuts in MY 1998 to near $500 per st. In any 
event, the quota formula is set by statute and the determined quota was 
calculated using that formula.

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 1997 price support level for additional peanuts was 
announced at $132 per st on February 14, 1997. The national average 
price support rate for quota peanuts, for each of the 1996 through 2002 
crops, is set at $610 per st by the 1996 Act and is codified at 7 CFR 
section 1446.103. So that both prices may be codified in the same 
regulations, this final rule moves the regulation setting out the 
additional peanut price from 7 CFR part 1421 to 7 CFR part 1446.
    The MY 1997 price support level for additional peanuts was 
established at $132 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 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 was 
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 
$174.50 per st, down $60.50 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 about 11.2 percent from MY 1996. The MY 
1997 average soybean oil price is expected to be $0.220 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

[[Page 62692]]

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, down about 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.

Discussion of Comments

    During the comment period there were six comments received 
concerning the 1997 additional peanut price support level. One sheller 
association, two sheller firms, and the three producer-owned 
cooperatives made specific recommendations on the additional price 
support level. They recommended a range in the price support level from 
no-change ($132 per st for the 1996 crop) up to $200 per st. Strong 
prices in the oil seed complex were cited as the reason to increase the 
additional price support level. The final determination was made for 
the reasons given above. Based on the consideration of these same 
factors, the 1996-crop additional peanut support level was also $132 
per st. An analysis of the data for that year is available from the 
contact person listed above. In the proposed rule it was indicated 
incorrectly that the 1996 additional peanut price had been codified 
previously in 7 CFR part 1421. Likewise, the 1996 price for sales by 
the CCC for export edible use of 1996-crop loan inventory peanuts had 
also not been codified. Both of these determinations are also codified 
in this rule and are given the new locations used for the 1997 
determinations rather than the location for the corresponding 
determinations for the prior years. This change of location is the 
result of a reorganization of Departmental regulations following the 
1996 legislation referred to earlier.

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

    The establishment of 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. 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 discourage private sales. If too low, the 
minimum price could have an unnecessary, adverse effect on prices paid 
to producers for additional peanuts. 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 was established at $400 per st on 
April 30, 1997. This price should encourage exports while providing 
price stability for additional peanuts sold under contract. It will 
also assure handlers that CCC will not undercut their export 
contracting efforts with offerings of additional peanuts for export 
edible sales below the minimum sales price.

Discussion of Comments

    During the comment period seven comments were received concerning 
the minimum export edible sales price. Four suggested keeping the price 
at $400 per st, and three suggested lowering it to between $300 and 
$375 per st. Producer groups preferred keeping the minimum price at 
$400 per ton while shellers preferred lowering it. The final price was 
set based on the factors set forth above. However, the Department plans 
to seek comments on this discretionary price for subsequent years to 
determine whether there should be a new method proposed for determining 
the price. As indicated, the 1996-crop CCC price was the same amount 
for the same reasons and that amount is also codified in this rule.
    In addition, this rule provides a minor revision of the provisions 
of 7 CFR 1421.27 with respect to the listing of the minimum sales price 
for certain sales in situations where the farmer has a farm-stored 
price support loan. The current regulations have an unnecessary 
reference to the sales price for export edible use of 1996 crop farm-
stored peanuts. The reference is removed in this final rule, which does 
not change the substance of the rule. The regulations in 7 CFR part 
1421 will simply rely on the announcement of the general price or 
export edible use sales by CCC of loan peanuts which will now be 
codified in 7 CFR part 1446.

List of Subjects

7 CFR Part 729

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

7 CFR Part 1421

    Loan programs, Agriculture loan and loan deficiency payments, 
Peanuts, Reporting and recordkeeping requirements, Warehouses.

7 CFR Part 1446

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

    Accordingly, this final rule amends 7 CFR parts 729, 1421 and 1446 
as follows:

PART 729--PEANUTS

    1. The authority citation for 7 CFR part 729 continues 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 revising paragraph (c) to read as 
follows:


Sec. 729.216  National poundage quota.

* * * * *
    (c) Quota determination for individual marketing years (excluding 
seed):
    (1) The national poundage quota for quota peanuts for marketing 
year 1996 is 1,100,000 short tons.
    (2) The national poundage quota for quota peanuts for marketing 
year 1997 is 1,133,000 short tons.

PART 1421--GRAINS AND SIMILARLY HANDLED COMMODITIES

    3. The authority citation for 7 CFR part 1421 continues to read as 
follows:

    Authority: 7 U.S.C. 7231-7235, 7237; and 15 U.S.C. 714b and 
714c.

    4. Section 1421.27 is amended by: in paragraph ``(a)(2),'' adding 
the word ``and'' after the semicolon; removing paragraph ``(a)(3)'', 
and redesignating paragraph ``(a)(4)'' as paragraph ``(a)(3).''

PART 1446--PEANUTS

    5. The authority citation for 7 CFR part 1446 continues to read as 
follows:

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


Sec. 1446.103  [Amended]

    6. Section 1446.103 is amended by adding the words ``as set out in 
Sec. 1446.310'' after ``announced by the Secretary'' to the definition 
of ``Support rate'' in that section.

[[Page 62693]]

    7. Two new sections, Secs. 1446.310 and 1446.311, are added to 
subpart C to read as follows:


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 is $132 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 crop is $400 per short ton.

    Signed at Washington, DC, on October 26, 1997.
Bruce R. Weber,
Acting Administrator, Farm Service Agency and Acting Executive Vice 
President, Commodity Credit Corporation.
[FR Doc. 97-30965 Filed 11-24-97; 8:45 am]
BILLING CODE 3410-05-P