[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Rules and Regulations]
[Pages 68142-68150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-34135]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV97-905-1 FIR]
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Limiting the Volume of Small Florida Red Seedless Grapefruit
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (Department) is finalizing
without change the provisions of an amended interim final rule limiting
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). The amended interim final rule limited
[[Page 68143]]
the volume of size 48 and/or size 56 red seedless grapefruit handlers
could ship during the first 11 weeks of the 1997-1998 season that began
in September. That rule provided a sufficient supply of small sized red
seedless grapefruit to meet market demand, without saturating all
markets with these small sizes. The committee believed this action was
necessary to help stabilize the market and improve grower returns.
EFFECTIVE DATE: January 30, 1998.
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 M. Dec, Marketing Order
Administration Branch, F&V, AMS, USDA, room 2522-S, P.O. Box 96456,
Washington, DC 20090-6456; telephone: (202) 720-2491, Fax: (202) 205-
6632. 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) 205-6632.
SUPPLEMENTARY INFORMATION: This 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 is issuing this rule in conformance with Executive
Order 12866.
This 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 the previous five
seasons, handlers can calculate the volume of sizes 48 and/or 56 they
may ship in a regulated week.
This rule finalizes the provisions of an interim final rule as
amended limiting the volume of small red seedless grapefruit entering
the fresh market during the 11 week regulatory period from September
15, 1997, to November 30, 1997. A proposed rule was published on July
29, 1997, in the Federal Register (62 FR 40482). Subsequently, an
interim final rule was published September 12, 1997, in the Federal
Register (62 FR 47913). That rule limited 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. That rule limited the
volume of sizes 48 and/or 56 red seedless grapefruit by establishing a
weekly percentage for each of the 11 weeks. On October 30, 1997, an
amendment to the interim final rule was published in the Federal
Register (62 FR 58633) that changed the weekly percentage of sizes 48
and/or 56 red seedless grapefruit entering the fresh market for the
last five weeks of the regulatory period from 30 percent to 35 percent.
This rule finalizes the interim final rule as amended, without change.
The committee originally voted at its May 28, 1997, meeting to
establish a weekly percentage of 25 percent for each of the 11 weeks in
a vote of 10 in favor to 7 opposed. The committee recommended adjusting
the percentages at its meeting August 26, 1997, in a vote of 14 in
favor to 3 opposed, recommending weekly percentages 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 at 30 percent
for the remainder of the 11 weeks. The committee met again, October 14,
1997, and in a unanimous vote recommended changing the weekly
percentage for the last five weeks from 30 percent to 35 percent.
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
[[Page 68144]]
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.
During committee deliberations at the May 28, 1997, meeting,
several concerns were raised regarding the regulation. One area of
concern was the possible impact the regulation may have on exports.
Several members stated that there was 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 the action would have on
packouts. It was stated that the rule could reduce the volume packed,
resulting in higher packinghouse costs. The purpose of the recommended
rule was 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. The rule might 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, and
therefore, 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 could 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 at the May 28, 1997, meeting 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.
At the May 28, 1997, meeting, 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. The rule
published on September 12, 1997, affected even fewer shipments by
[[Page 68145]]
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 was
still allowed into all channels of trade, and allowances were in place
to help handlers address any market shortfall.
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 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 believed this level
would 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 the
industry moves into the season and shipments increase, a weekly
percentage of 30 percent would provide the best balance between supply
and demand for small sized red seedless grapefruit.
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.
However, the committee met again October 14, 1997, and revisited
the weekly percentage issue. The committee recommended another revision
in the weekly percentages. The committee recommended that the weekly
percentage for the final five weeks of the regulated period (October 27
through November 30, 1997) be changed from 30 percent to 35 percent.
In its discussion of this change, the committee reviewed the
percentages previously recommended and the current state of the crop.
In addition, the committee had some new information regarding this
season that was not available during its earlier meetings. On October
10, 1997, the Department released its crop estimate for Florida
grapefruit. The estimate for total Florida grapefruit was 54 million
boxes, a 3.2 percent reduction from last season. In addition, the
committee was provided information regarding size distribution
developed from a September size survey. The size survey was conducted
by the Department as part of the crop estimate and showed that more
small sizes were available than anticipated. The committee also had the
benefit of having operated several weeks under a weekly percentage
regulation.
During the committee's discussion, there were many comments that
the use of the weekly percentage rule was being effective. They
believed that this rule was having a positive effect on the market and
on returns. The weekly percentages, combined with a very limited
processing market, has forced the industry to do more spot picking for
the available markets.
Several persons attending the committee meeting encouraged the
committee to stay the course, and leave
[[Page 68146]]
the weekly percentages as they were established. However, others
thought that the 30 percent weekly percentage rate for the last five
weeks of the regulation period might be too restrictive. Concerns were
again voiced that the method for calculating allotment base was not
always a good approximation of a handler's historical shipments during
this 11-week period. Based on the shipment data available for the
current season, and shipments from past seasons, total weekly shipments
of red seedless grapefruit during the rest of the regulatory period are
expected to exceed the average week calculated for the industry of
976,782 cartons. There is also some indication that shipments during
the remainder of the regulation period may be greater than in past
seasons. With shipments running higher, the committee concluded that
establishing a 30 percent weekly percentage rate in combination with
the calculated average week would result in available allotment of less
than 30 percent of overall shipments.
The committee discussed the merits of changing the established
weekly percentage rate for the last five weeks from 30 percent to 35
percent. Such a change represents an additional industry allotment of
less than 50,000 cartons. The effect on an individual handler's
allotment would be minimal. However, there was discussion that such a
change would provide some additional flexibility for handlers.
In addition, having been operating under a weekly percentage for
several weeks, members stated that the regulation was being effective
and moving to a more restrictive level was unnecessary. Members agreed
that one of the most important goals of this regulation was to create
some discipline in the way fruit was picked and marketed. Several
individuals stated that there are indications from the current and past
regulatory weeks that maintaining the weekly percentage at 35 percent
for the remainder of the 11 weeks would continue to accomplish this
goal.
The committee examined the information on past shipments and on the
size distribution information available for the current season. Based
on the size survey, 37.6 percent of the crop is size 48 or 56. This
amount was somewhat larger than originally expected, indicating that
there was a greater volume of smaller sizes than the committee had
anticipated. Considering this, and the other information discussed, the
committee agreed that establishing a weekly percentage of 35 percent
for the remainder of the regulated period would address the goals of
this regulation, while providing handlers with some additional
flexibility.
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. The committee considered the official crop estimate
and the information in the UF-IFAS study. Committee members also
discussed how the crop was sizing. Using this information on the 1997-
98 crop, the committee members believed that establishing the weekly
percentages as recommended provided enough small sizes to supply those
markets without disrupting the markets for larger sizes.
After considering the concerns expressed, and the available
information, the committee determined that the interim final rule as
amended was needed to regulate shipments of small sized red seedless
grapefruit.
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 was 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 were added and divided by five to establish an
average season. This average season was 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.
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 week is calculated as
an average of the weeks they have shipped during the current season.
This rule finalizes, without change, the weekly percentages for
each of the eleven weeks of the regulatory period (September 5 through
November 30) that appeared in the amended interim final rule.
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
[[Page 68147]]
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.
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 final 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, 1997. 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.
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 Economic Analysis Branch, 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.
[[Page 68148]]
The concern about packinghouse costs was that volume regulation
could mean 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. The September 12, 1997, interim final
rule as subsequently amended on October 30, 1997, affected 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 that action a sufficient volume of
small sized red grapefruit was still allowed into all channels of
trade, and allowances were 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.
The September 12, 1997, interim final rule and the subsequent
amendment on October 30, 1997, provided 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 is 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 is 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 believed
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 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.
The 11-week volume regulation 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 in the weekly volume regulation 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 the recommended volume
regulation. 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
[[Page 68149]]
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.
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 that change, the committee reviewed the
initial and the revised 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
have exceeded actual shipments for each of the first three weeks that
were regulated under the September 12, 1997, rule.
The committee determined that if available allotment would have
exceeded 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 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.
At the August 27, 1997, meeting, 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 at the August 27, 1997, meeting,
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, a tighter percentage was desirable. The
committee believed that as the industry moves into the season and
shipments increase, a weekly percentage of 30 percent would provide the
best balance between supply and demand for small sized red seedless
grapefruit.
However, on October 14, 1997, the committee met again and
recommended a further revision to the weekly percentages. The committee
recommended that the weekly percentages for the last five weeks of the
regulatory period be changed from 30 percent to 35 percent. In its
discussion of this change, the committee reviewed the initial
percentages recommended and the current state of the crop.
The committee also reviewed some new information regarding this
season that was not available during its earlier meetings. On October
10, 1997, the Department released its crop estimate for Florida
grapefruit. The estimate for total Florida grapefruit was 54 million
boxes, a 3.2 percent reduction from last season. In addition, the
committee was provided information regarding size distribution
developed from a September size survey. This survey was conducted by
the Department and showed a larger percentage of small sizes than
anticipated. The committee also had the benefit of having operated
several weeks under a weekly percentage regulation.
There were many comments by those attending the meeting that the
use of the weekly percentage rule was being effective. Members stated
that the rule was having a positive effect on the market and on
returns. Overall committee support for the regulation had increased.
The committee considered that the 30 percent weekly percentage rate
for the last five weeks of the regulation period may be too
restrictive. Reviewing shipment data for the beginning weeks of this
season and shipments from past seasons, the committee determined that
total weekly shipments during the rest of the regulatory period would
exceed the average week calculated for the industry of 976,782 cartons.
There was also some discussion that shipments during the remainder of
the regulation period may be greater than in past seasons. The
committee considered that with shipments running higher, establishing a
30 percent weekly percentage rate in combination with the calculated
average week would actually be establishing a rate more restrictive
than 30 percent of overall shipments.
The committee discussed the merits of changing the established
weekly percentage rate for the last five weeks from 30 percent to 35
percent. Such a change represents an additional industry allotment of
less than 50,000 cartons, and should have a minimal impact when
distributed to individual handlers. However, members thought that an
increase would provide some additional flexibility for handlers.
In addition, having been operating under a weekly percentage for
several weeks, members stated that the regulation was being effective
and moving to a more restrictive level was unnecessary. Members agreed
that one of the most important goals of this regulation was to create
some discipline in the way fruit was picked and marketed. Committee
members believed that maintaining the weekly percentage at 35 percent
for the remainder of the 11 weeks would continue to accomplish this
goal.
The committee examined the information on past shipments and on
[[Page 68150]]
the size distribution information available for the current season.
Based on the size survey, 37.6 percent of the crop is size 48 or 56.
This amount was somewhat larger than anticipated, indicating that there
were more smaller sized red grapefruit than the committee had
originally thought. Considering this, and the other information
discussed, the committee agreed that establishing a weekly percentage
of 35 percent for the remainder of the regulated period would address
the goals of this regulation, while providing handlers with some
additional flexibility.
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 (44 U.S.C. Chapter
35) 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.
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 proposed rule and previous interim final rule relative to this
action 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, the
August 26, 1997, meeting, and the October 14, 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). A 15-day comment
period was provided to allow interested persons to respond to the
proposal. Thirty-five comments were received. An interim final rule
concerning this action was published in the Federal Register on Friday,
September 12, 1997 (62 FR 47913). Copies of both rules were mailed or
sent via facsimile to all committee members and to grapefruit growers
and handlers. The rules were also made available through the Internet
by the Office of the Federal Register.
The 35 comments received in response to the proposed rule were
addressed in the interim final rule published in the Federal Register
on Friday, September 12, 1997 (62 FR 47913).
In the September 12, 1997, interim final rule, a 10-day comment
period was provided to allow interested persons to respond to the rule.
One comment was received, that comment was addressed in an amendment to
the interim final rule published on October 30, 1997 (62 FR 58633). The
amendment provided another 10-day comment period. No additional
comments were received.
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.
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
Accordingly, the interim final rule amending 7 CFR Part 905 which
was published at 62 FR 47913 (September 12, 1997) and amended at 62 FR
58633 (October 30, 1997), is adopted as a final rule without change.
Dated: December 24, 1997.
Sharon Bomer Lauritsen,
Acting Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 97-34135 Filed 12-30-97; 8:45 am]
BILLING CODE 3410-02-P