[Federal Register Volume 62, Number 231 (Tuesday, December 2, 1997)]
[Proposed Rules]
[Pages 63678-63681]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-31573]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 62, No. 231 / Tuesday, December 2, 1997 /
Proposed Rules
[[Page 63678]]
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DEPARTMENT OF AGRICULTURE
Farm Service Agency
7 CFR Part 729
Commodity Credit Corporation
7 CFR Part 1446
RIN 0560-AF16
1998-Crop Peanut National Poundage Quota, 1998-Crop Additional
Peanuts National Average Support Level and Minimum Commodity Credit
Corporation (CCC) Export Edible Sales Price for the 1998 and Subsequent
Crops of Additional Peanuts
AGENCY: Farm Service Agency and Commodity Credit Corporation, USDA.
ACTION: Proposed rule.
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SUMMARY: The Agricultural Adjustment Act of 1938, (the 1938 Act) as
amended, requires that the national peanut poundage quota for the 1998
crop be announced by December 15, 1997. The Agricultural Act of 1949,
(the 1949 Act), as amended, requires that the additional support level
be announced not later than February 15, 1998. The minimum CCC export
edible sales price for additional peanuts is usually announced at the
same time as the price support level. This proposed rule suggests a
national poundage quota figure in the range between 1,133,000 short
tons (st) and 1,175,000 st, proposes that the national average
additional price support level for the 1998 crop peanuts be set between
$132 per st and $175 per st, and that the minimum CCC sales price for
1998 and subsequent crops of additional peanuts for export edible use
be set between $350 to $400 per st or by formula.
DATES: Comments must be received by December 9, 1997, in order to be
assured of consideration.
ADDRESSES: Comments must be submitted to the Director, Tobacco and
Peanuts Division, Farm Service Agency (FSA), United States Department
of Agriculture, STOP 0514, 1400 Independence Avenue, S.W., Washington,
DC 20250-0514. All written submissions will be made available for
public inspection from 8:15 a.m. to 4:45 p.m., Monday through Friday,
except holidays, in Room 5750-South Building, 1400 Independence Avenue,
S.W., Washington, DC 20250-0514.
FOR FURTHER INFORMATION CONTACT: Kenneth M. Robison, Tobacco and
Peanuts Division, FSA, USDA, STOP 0514, 1400 Independence Avenue, S.W.,
Washington, DC 20250-0514, telephone 202-720-9255. Copies of the cost-
benefit assessment prepared for the rule can be obtained from Mr.
Robison.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed rule has been determined to be significant and was
reviewed by OMB under Executive Order 12866.
Federal Assistance Program
The title and number of the Federal Assistance Program, as found in
the Catalog of Federal Domestic Assistance, to which this rule applies
are: Commodity Loans and Purchases --10.051.
Executive Order 12998
This rule has been reviewed in accordance with Executive Order
12998. The provisions of this proposed rule do not preempt State laws,
are not retroactive, and do not involve administrative appeals.
Regulatory Flexibility Act
It has been determined that the Regulatory Flexibility Act is not
applicable to this proposed rule since neither FSA nor CCC is required
by 5 U.S.C. 553 or any other provision of law to publish a notice of
proposed rulemaking with respect to the subject of these
determinations.
Paperwork Reduction Act
These proposed amendments do not contain information collections
that require clearance by the Office of Management and Budget under the
provisions of 44 U.S.C. chapter 35.
Discussion
This proposed rule would amend 7 CFR part 729 to set forth the
1998-crop peanut national poundage quota, and 7 CFR part 1446 to set
forth the 1998-crop national average support level for additional
peanuts and the minimum CCC sales price for 1998 crop additional
peanuts sold for export edible use.
A. National Poundage Quota
Section 358-1(a)(1) of the 1938 Act, as amended by the Federal
Agricultural Improvement and Reform Act of 1996 (1996 Act), requires
that the Secretary set a basic national quota for peanuts for each of
the 1996 through 2002 marketing years (MY) at a level that is equal to
the quantity of peanuts (in tons) that the Secretary estimates will be
devoted in each MY to domestic edible use (excluding seed) and related
uses. As to seed, section 358-1(b)(2)(B) of the 1938 Act provides that
a temporary allocation of quota pounds for the MY only in which the
crop is planted shall be made to producers for each of the 1996 through
2002 MYs and that the temporary seed quota allocation shall be equal to
the pounds of seed peanuts planted on the farm as may be adjusted and
determined under regulations prescribed by the Secretary. The MY for
1998-crop peanuts will be from August 1, 1998 through July 31, 1999.
Producers will vote in a referendum on December 1-4, 1997 to determine
whether they approve marketing quotas for MY 1998 to MY 2002.
The national poundage quota for MY 1997 was set at 1,133,000 st.
This rule proposes that the national poundage quota for MY 1998 be set
between 1,133,000 st and 1,175,000 st based on the following data:
------------------------------------------------------------------------
Short tons
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97.8% 94.3%
production production
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Domestic Edible Use:
Domestic food................................. 933,000 933,000
On farm and local sales 9,000 9,000
Related Uses:
Crushing residual............................. 123,000 123,000
Shrinkage and other losses.................... 37,500 37,500
Transfer to quota............................. 5,000 5,000
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Subtotal.................................... 1,107,500 1,107,500
Allowance for underproduction................. 25,500 67,500
=======================
Totals...................................... 1,133,000 1,175,000
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[[Page 63679]]
The estimate of 1998 domestic food use was developed in two steps.
First, total domestic edible utilization of 1,088,000 st was estimated
by the USDA Interagency Commodity Estimates Committee (ICEC). Second,
this estimate was reduced by 155,000 st to exclude peanut imports,
peanut butter imports, and peanut butter exports. Although estimates of
domestic edible utilization typically include product exports, peanut
butter exports are generally either made from, or may otherwise be
credited under section 358(e)(1) of the 1938 Act as being made from
additional peanuts. MY 1997 farm use and local sales were estimated at
1 percent of ICEC's MY 1998 production estimate. This percentage
reflects the average difference between USDA production data and
Federal-State Inspection Service inspections data. About one-half of
farm use and local sales is allocated to food use and the remainder to
seed, which is excluded from quota determinations under amendments to
the 1938 Act made 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 must be sufficient to provide for the
shelling of both edible and crushing grades. The crushing residual
identified above reflects the assumption that crushing grade peanuts
will be about 12 percent, on a farmer stock basis, of the total of MY
1998 domestic edible use production.
The allowance for shrinkage and other losses is an estimate of
reduced kernel weight available for milling as well as for kernel
losses due to damage, fire, and spillage. These losses were estimated
by multiplying a factor of 0.04 times domestic edible use. This factor
is the minimum shrinkage generally allowed for calculating obligations
of handlers under section 359a(d)(2)(B)(iv) of the 1938 Act and is
believed to be a fair estimate of such shrinkage for purposes of this
determination, taking into account all factors.
Segregation 2 and 3 loan transfers to quota loan represent
transfers of Segregation 2 and 3 peanuts from additional price support
loan pools to quota loan pools. Such transfers occur when quota peanut
producers have insufficient Segregation 1 peanuts to fill their quotas,
yet have Segregation 2 and 3 peanuts in additional loan pools which
would have been eligible to be pledged as collateral for price support
loans at a discounted quota loan rate.
In addition, an allowance has been made for underproduction. Under
past legislation, only 92 percent of the quota had been marketed. Prior
to the 1996 crop, at the national level, any unmarketed pounds up to 10
percent of the national marketing quota could be added to the farms
basic quota for that crop year. Under the 1996 Act any quota pounds not
marketed cannot be carried forward and would be a loss of potential
income for producers, therefore, it is expected that somewhat more than
92 percent of the quota will be marketed in MY 1998. In MY 1996 about
97.3 percent was marketed and in MY 1997 about 97.5 percent of quota is
expected to be marketed. It is anticipated that about 94 to 98 percent
of the MY 1998 quota will be marketed.
The lowest proposed 1998 quota level, as set forth above, reflects
expected growth in domestic consumption of peanut products through
government purchases, new uses and a small increase in demand resulting
from lower peanut support prices in recent years. This level
essentially reflects the assumption that about 97.8 percent of the
quota will be marketed and adds increased demand for edible peanuts.
The higher range proposal takes into account the possibility that
marketings of quota could fall as low as the 94.3 percent level. This
range appears to be a fair estimate of possible market conditions.
Disappearance of peanuts into primary products has been relatively
flat over the last year. Overall demand, including imports, is
projected to increase about 1.5 percent. However, government support
purchases in MY 1996 have increased about 45 percent from 22,750 st
farmer stock (fs) in MY 1995 to 32,200 st (fs) in MY 1996.
A significantly larger quota option than those presented would
lower the price received by growers from first buyers and could reduce
costs to consumers for peanut products slightly. However, it is assumed
that a substantial increase in quota would be needed to lower the
average grower price to a level near the average national support
price. A quota in the neighborhood of 1,500,000 tons would likely
result in sufficient quantities of peanuts delivered at the right time
and place such that the average price would be only slightly higher
than $610 per ton.
This option only becomes viable if one assumes greater
responsiveness in demand to additional supplies. One must assume a
significant growth in demand because of a lower price to justify this
option.
The cost of overestimating demand would be high. Assuming the
demand for greater supplies of peanuts is slight, this level of quota
could result in a surplus and a loss on loan placements for more than
300,000 tons of peanuts. These peanut losses would be around $400 a
ton. Losses of up to $120 million would occur and result in producer
assessments of over $100 per ton the following year. This level of
assessment would lower the effective price received by producers for
quota peanuts in MY 1999 to $500 per ton or less.
Buybacks worked well in MY 1996. Buyback is a term used to describe
a marketing transaction in which a producer places additional peanuts
under price support loan at the additional loan rate and a handler
simultaneously purchases the same peanuts at the quota support level
from the marketing associations for domestic edible use. To bolster
stocks in MY 1996, the peanut industry bought back over 100,000 tons of
additional peanuts. In MY 1997, it is anticipated that the peanut
industry will again use the buyback provisions to purchase about
100,000 tons in order to continue building stocks. Depending on stock
levels at the beginning of MY 1998, the peanut industry may again use
buybacks to build stocks.
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, was set at $610 per st by the 1996 Act and is codified at 7 CFR
section 1446.103. Regulations pertaining to price support loan levels
for additional peanuts are found in 7 CFR section 1446.310.
The range for the MY 1998 price support level for additional
peanuts is recommended to be within the range of $132 per st and $175
per st. Additional loan peanuts are sold out of inventory in order to
recoup the price support loan principal, interest and related costs. In
the proposed price range, if the edible peanut market deteriorated to a
point that the entire loan inventory was sold as oil stock, anticipated
revenues should be adequate to ensure no losses to CCC from the sale or
disposal of
[[Page 63680]]
additional peanuts. The statutory factors have been analyzed as set out
below:
1. The domestic use of peanut oil during MY 1998 is forecast to be
105,000 st, up 2,500 st from MY 1997 projected domestic use. MY 1998
peanut oil beginning stocks are expected to be 35,000 st, down about 19
percent from MY 1997. The MY 1998 average peanut oil price is expected
to be $0.395 per pound, down $0.018 per pound from MY 1997.
2. The domestic use of peanut meal during MY 1998 is forecast to be
150,000 st, unchanged from MY 1997 projected domestic use. MY 1998
peanut meal beginning stocks are expected to be 4,000 st, unchanged
from MY 1997. The MY 1998 average peanut meal price is expected to be
$152.50 per st, down $12.50 per st from MY 1997.
3. The domestic disappearance of soybean oil during MY 1998 is
forecast to be 7,262,500 st, up 1.6 percent from projected MY 1997
domestic disappearance. MY 1998 soybean oil beginning stocks are
expected to be 890,000 st, up 11.3 percent from MY 1997. The MY 1998
average soybean oil price is expected to be $0.230 per pound, down
$0.003 per pound from MY 1997.
4. The domestic disappearance of cottonseed oil during MY 1998 is
forecast to be 515,000 st, unchanged from projected MY 1997 domestic
disappearance. MY 1998 cottonseed oil beginning stocks are expected to
be 42,500 st, up 1.2 percent from MY 1997. The MY 1998 average
cottonseed oil price is expected to be $0.250 per pound, down $0.01 per
pound from MY 1997.
5. The domestic disappearance of soybean meal during MY 1998 is
forecast to be 29,000,000 st, up 3.6 percent from projected MY 1997
domestic disappearance. MY 1998 soybean meal beginning stocks are
expected to be 250,000 st, up 25 percent from MY 1997. The MY 1998
average soybean meal price is expected to be $187.50 per st, down
$20.00 per st from MY 1997.
6. The domestic disappearance of cottonseed meal during MY 1998 is
forecast to be 1,635,000 st, down 0.3 percent from projected MY 1997
domestic disappearance. MY 1998 cottonseed meal beginning stocks are
expected to be 52,000 st, down 16.1 percent from MY 1997. The MY 1998
average cottonseed meal price is expected to be $140.00 per st, down
$15.00 per st from MY 1997.
7. The world use of peanuts for MY 1997 is expected to be 13.05
million metric tons, down 10.4 percent from MY 1996. World peanut
production for MY 1997 is forecast to be 24.58 million metric tons,
down 7.8 percent from MY 1996. Ending stocks for MY 1997 are forecast
at 0.51 million metric tons, up 4.5 percent from 1996.
MY 1997 begins with record oil stocks and large imports of oil
during MY 1996. Yet, peanut oil prices are projected to be 41.3 cents
per pound. Based on the supply use situation at the beginning of MY
1997 and projections for MY 1998, there are conflicting signals in the
supply price relationship in the peanut oil market that suggest caution
in setting the additional peanut support level. Also, based on the
1996/97 and 1997/98 marketing seasons, producers are expected to place
about 10,000 st of quota peanuts and 140,000 st of additional peanuts
under price support loan.
C. Minimum CCC Sales Price for Additional Peanuts Sold for Export
Edible Use
A minimum price at which 1998 crop additional peanuts owned or
controlled by CCC may be sold for use as edible peanuts in export
markets is a discretionary action that, by practice, is expected to be
announced on or before February 15, 1998, the same time that the
additional peanut support level for the 1998 crop is announced. The
announcement of that price provides producers and handlers with
information to facilitate the negotiation of private contracts for the
sale of additional peanuts for export.
An overly high price may create an unrealistic expectation of high
pool dividends and discourage private sales. If too low, the minimum
price could have an unnecessary, adverse effect on prices paid to
producers for additional peanuts.
This proposed rule follows the publication of an advance notice of
proposed rule making of August 18, 1997 published in the Federal
Register (62 FR 43955) soliciting comments relative to the method for
determining the minimum export edible sales price for additional
peanuts and relative to what that price should be. Ten comments were
received relative to the method for determining the minimum export
edible sales price for additional peanuts and relative to what the
price should be. Seven of the comments were from organizations
representing producers. The seven producer organizations commenting
favored maintaining the $400 per st minimum price. Three comments were
from organizations representing shellers. The three sheller
organizations commenting favored reducing the minimum export edible
sales price or establishing it by formula.
Grower groups which favored setting the minimum export edible sales
price at $400 per st in 1998, argued (1) a fixed price for the CCC
export edible sales price has worked well for 12 consecutive years, (2)
a lower CCC export edible sales price would result in lower grower
revenues, (3) the decision of when and at what price to contract is
complex and a formula could create even more uncertainty and (4) a lack
of a publicly available data series creates problems and concerns for
using a formula.
Sheller groups, which favored either a formula or a reduced minimum
sales price argued that new pricing would: (1) Increase U.S.
competitiveness in world edible peanut markets and (2) increase U.S.
flexibility in marketing peanuts. One such proposal would base the
minimum export sales price at 10 percent above the current oil value of
peanuts and adjust the price monthly. Another sheller group recommended
setting the minimum export edible sales price at between $350 and $375
per st in 1998 and that the price be reset annually to account for
volatility in export edible peanut markets.
It is proposed that the minimum price at which 1998 crop additional
peanuts owned or controlled by CCC may be sold for use as edible
peanuts in export markets be established within the range of $350 to
$400 per st or be set by formula. The objective of the level set or
method used is to encourage exports while providing price stability for
additional peanuts sold under contract. It should assure handlers that
CCC will not undercut their export-contracting efforts with offerings
of additional peanuts for export edible sale below the contract price
of the contract additional peanuts.
List of Subjects
7 CFR Part 729
Peanuts, Penalties, Poundage quotas, Reporting and recordkeeping
requirements.
7 CFR Part 1446
Loan programs--Agriculture, Peanuts, Price support programs,
Reporting and recordkeeping requirements, Warehouses.
Accordingly, it is proposed that 7 CFR parts 729 and 1446 be
amended as follows:
PART 729--PEANUTS
1. The authority citation for 7 CFR part 729 continues to read as
follows:
[[Page 63681]]
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 (excluding seed) for quota peanuts
for marketing year 1996 is 1,100,000 short tons.
(2) The national poundage quota (excluding seed) for quota peanuts
for marketing year 1997 is 1,133,000 short tons.
(3) The national poundage quota (excluding seed) for quota peanuts
for marketing year 1998 will be set between 1,133,000 and 1,175,000
short tons.
PART 1446--PEANUTS
3. 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.
4. Section 1446.310 is amended by adding a new paragraph (c) to
read as follows:
Sec. 1446.310 Additional peanut support levels.
* * * * *
(c) The national support rate for additional peanuts for the 1998
crop will be at a level which shall be between $132 per short ton and
$175 per short ton.
5. Section 1446.311 is amended by adding new paragraph (c) to read
as follows:
Sec. 1446.311 Minimum CCC sales price for certain peanuts.
* * * * *
(c) The minimum CCC sales price for additional peanuts to be sold
from the price support loan inventory for export edible use from the
1998 and subsequent crops will be between $350 and $400 per short ton
or set by formula as announced by the Director of the Tobacco and
Peanuts Division, FSA.
Signed at Washington, DC, on November 26, 1997.
Keith Kelly,
Administrator, Farm Service Agency and Executive Vice President,
Commodity Credit Corporation.
[FR Doc. 97-31573 Filed 11-26-97; 3:08 pm]
BILLING CODE 3410-05-P