[Federal Register Volume 63, Number 36 (Tuesday, February 24, 1998)]
[Proposed Rules]
[Pages 9160-9163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-4595]


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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. 63, No. 36 / Tuesday, February 24, 1998 / 
Proposed Rules  

[[Page 9160]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 993

[Docket No. FV98-993-1 PR]


Dried Prunes Produced in California; Undersized Regulation for 
the 1998-99 Crop Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule invites comments on changes to the undersized prune 
regulation for dried prunes received by handlers from producers and 
dehydrators under Marketing Order No. 993 for the 1998-99 crop year. 
The marketing order regulates the handling of dried prunes produced in 
California and is administered locally by the Prune Marketing Committee 
(Committee). This rule would remove the smallest, least desirable of 
the marketable size dried prunes produced in California from human 
consumption outlets, and allow handlers to dispose of the undersized 
prunes in such outlets as livestock feed. The Committee estimated that 
this rule would reduce the calculated excess of about 78,000 tons of 
dried prunes expected at the end of the 1997-98 crop year, by 
approximately 7,300 tons, leaving sufficient prunes to fulfill foreign 
and domestic trade demand.

DATES: Comments received by March 26, 1998, will be considered prior to 
issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent in triplicate to the Docket 
Clerk, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 
96456, Washington, DC 20090-6456; Fax: (202) 205-6632. Comments should 
reference the docket number and the date and page number of this issue 
of the Federal Register and will be available for public inspection in 
the Office of the Docket Clerk during regular business hours.

FOR FURTHER INFORMATION CONTACT: Richard P. Van Diest, Marketing 
Specialist, California Marketing Field Office, Fruit and Vegetable 
Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno, 
California 93721; telephone: (209) 487-5901, Fax: (209) 487-5906; or 
George Kelhart, Technical Advisor, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, room 2525-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, Fruit and Vegetable Programs, 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 and Order No. 993, both as amended (7 CFR part 993), 
regulating the handling of dried prunes produced in California, 
hereinafter referred to as the ``order.'' The marketing agreement and 
order are effective under the Agricultural Marketing Agreement Act of 
1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the 
``Act.''
    The Department of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This proposal would 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 the date of the entry of the ruling.
    This proposal invites comments on changes to the undersized 
regulation currently in effect for French prunes which pass freely 
through a screen opening from 23/32 to 24/32 in diameter and for non-
French prunes from 28/32 to 30/32 of an inch in diameter for the 1998-
99 crop year for volume control purposes. This rule would remove the 
smallest, least desirable of the marketable size dried prunes produced 
in California from human consumption outlets. The rule would be in 
effect from August 1, 1998, through July 31, 1999, and was unanimously 
recommended by the Committee at a November 18, 1997, meeting.
    Section 993.19b of the prune marketing order defines undersized 
prunes as prunes which pass freely through a round opening of a 
specified diameter. Since August 1, 1982, the undersized dried prune 
regulation specified in Sec. 993.49(c) of the prune marketing order has 
been 23/32 of an inch for French prunes and 28/32 of an inch for non-
French prunes. These diameter openings have been in effect continuously 
for quality control purposes. Section 993.49(c) also provides that the 
Secretary upon a recommendation of the Committee may establish larger 
openings for undersized dried prunes whenever it is determined that 
supply conditions for a crop year warrant such regulation. Section 
993.50(g) states in part: ``No handler shall ship or otherwise dispose 
of, for human consumption, the quantity of prunes determined by the 
inspection service pursuant to Sec. 993.49(c) to be undersized prunes * 
* *.'' Pursuant to Sec. 993.52, minimum standards, pack specifications, 
including the openings prescribed in Sec. 993.49(c), may be modified by 
the Secretary, on the basis of a recommendation of the Committee or 
other information.
    Pursuant to the authority in Sec. 993.52 of the order, Sec. 993.400 
modifies the undersized openings prescribed in Sec. 993.49(c) to permit 
undersized regulations using openings of 23/32 or 24/32 of an inch for 
French prunes, and 28/32 or 30/32 of an inch for non-French prunes.

[[Page 9161]]

    During the 1974-75 and 1977-78 crop years, the undersized prune 
regulation was established by the Department at 23/32 of an inch in 
diameter for French prunes and 28/32 of an inch in diameter for non-
French prunes. These diameter openings were established in 
Secs. 993.401 and 993.404, respectively (39 FR 32733; September 11, 
1974; and 42 FR 49802; September 28, 1977). During the 1975-76 and 
1976-77 crop years, the undersized prune regulation was established at 
24/32 of an inch for French prunes, and 30/32 of an inch for non-French 
prunes. These diameter openings were established in Secs. 993.402 and 
993.403, respectively (40 FR 42530; September 15, 1975; and 41 FR 
37306; September 3, 1976). The prune industry had an excess supply of 
prunes, particularly small size prunes. Rather than recommending volume 
regulation percentages for the 1975-76, 1976-77, and 1977-78 crop 
years, the Committee recommended the establishment of an undersized 
prune regulation applicable to all prunes received by handlers from 
producers and dehydrators during each of those crop years. For the 
1994-95 crop year, the Committee recommended and the Department 
established volume regulation percentages and an undersized regulation 
at the aforementioned 23/32 and 28/32 inch diameter screen sizes.
    The objective of the undersized regulations during each of those 
crop years was to preclude the use of small prunes in manufactured 
prune products, such as juice and concentrate. Handlers could not 
market undersized prunes for human consumption, but could dispose of 
them in nonhuman outlets such as livestock feed.
    With these experiences as a basis, the marketing order was amended 
on August 1, 1982, establishing the continuing quality-related 
regulation for undersized French and non-French prunes under 
Sec. 993.49(c). That regulation has removed from the marketable supply 
those prunes which are not desirable for use in prune products.
    As in the 1970's, the prune industry is currently experiencing an 
excess supply of prunes, particularly in the smaller sizes. At its 
meeting on November 18, 1997, the Committee unanimously recommended 
establishing an undersized prune regulation at 24/32 of an inch in 
diameter for French prunes and 30/32 of an inch in diameter for non-
French prunes for volume control purposes for the 1998-99 crop year. 
That crop year begins August 1, 1998, and ends July 31, 1999.
    The Committee estimated that this rule would reduce the calculated 
excess of about 78,000 natural condition tons of dried prunes as of 
July 31, 1998, by approximately 7,300 natural condition tons, still 
leaving sufficient prunes to fill domestic and foreign trade demand 
during the 1998-99 crop year, and provide an adequate carryout on July 
31, 1999, for early season shipments until the new crop is available 
for shipment. According to the Committee, the desired inventory level 
to keep trade distribution channels full while awaiting the new crop is 
almost 41,000 natural condition tons.
    In its deliberations, the Committee reviewed statistics reflecting: 
(1) A worldwide prune demand which has been relatively stable at about 
260,000 tons; (2) a world wide oversupply that is expected to continue 
growing into the next century (estimated at 387,170 natural condition 
tons by the year 2001); (3) a continuing oversupply situation in 
California caused by increased production from increased plantings and 
higher yields per acre (between the 1993-94 and 1996-97 crop years, the 
yield ranged from 2.3 to 2.8 versus a 10 year average of 2.2 tons per 
acre); and (4) a worsening of California's excess supply situation, 
even though dried prune shipments in 1996-97 reached a near-record high 
of 183,252 packed tons. The Committee also considered the quantity of 
``D'' screen (24/32 of an inch in diameter for French prunes and 30/32 
of an inch in diameter for non-French prunes) prunes produced during 
the 1990-91 through 1996-97 crop years. The production of these small 
sizes ranged from 2,575 to 8,778 natural condition tons during that 
period. The Committee concluded that it had to utilize supply 
management techniques to accelerate the return to a balanced supply/
demand situation in the interest of California dried prune producers 
and handlers. The proposed changes to the undersized regulation for the 
1998-99 crop year are the result of these deliberations, and the 
Committee's desire to bring supplies more in line with market needs.
    The current oversupply situation facing the California prune 
industry has been caused by four consecutive large crops of over 
180,000 natural condition tons. Another large crop of 215,000 natural 
condition tons is forecast for the 1997-98 crop year, which will add to 
the existing oversupply. The yield per acre is forecast at 2.6 tons per 
acre. With an anticipated increase in bearing acreage, the 1998-99 
season crop could be larger.
    Because of the oversupply situation, producer prices for undersized 
prunes during the 1997-98 crop year have declined to $40-50 per ton. 
This represents a loss to the producer of about $260-270 per ton. The 
lower pricing of the smaller prunes is expected to provide producers an 
incentive to produce larger sizes which the industry needs to meet the 
increasing market demand for pitted prunes. However, the Committee felt 
that the undersized rule change was needed to expedite the reduction of 
the inventories of small prunes, and more quickly bring supplies in 
line with needs. Attainment of this goal would benefit all of the 
producers and handlers of California prunes.
    The recommended decision of June 1, 1981 (46 FR 29271) regarding 
undersized prunes states that the undersized prune regulation at the 
23/32 and 28/32 inch diameter size openings would be continuous for the 
purposes of quality control even in above parity situations. It further 
states that any change (i.e., increase) in the size of those openings 
would not be for the purpose of establishing a new quality-related 
minimum. Larger openings would only be applicable when supply 
conditions warranted the regulation of a larger quantity of prunes as 
undersized prunes. Thus, any regulation prescribing openings larger 
than those in Sec. 993.49(c) should not be implemented when the grower 
average price is expected to be above parity. As discussed later, the 
average grower price for prunes during the 1998-99 crop year is not 
expected to be above parity, and implementation of this more 
restrictive undersized regulation would be appropriate as far as parity 
is concerned.
    Section 8e of the Act requires that when certain domestically 
produced commodities, including prunes, are regulated under a Federal 
marketing order, imports of that commodity must meet the same or 
comparable grade, size, quality, or maturity requirements for the 
domestically produced commodity. This action does not impact the dried 
prune import regulation because the action to be implemented is for 
volume control, not quality control, purposes. The smaller diameter 
openings of 23/32 of an inch for French prunes and 28/32 of an inch for 
non-French prunes were implemented for the purpose of improving product 
quality. The recommended increases to 24/32 of an inch in diameter for 
French prunes and 30/32 of an inch in diameter for non-French prunes 
are for purposes of volume control. Therefore, the increased diameters 
would not be applied to imported prunes.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of

[[Page 9162]]

this rule on small entities. Accordingly, AMS has prepared this initial 
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 the 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 1,400 producers of dried prunes in the 
production area and approximately 21 handlers subject to regulation 
under the marketing order. Small agricultural producers have been 
defined by the Small Business Administration (13 CFR 121.601) as those 
having annual receipts less than $500,000, and small agricultural 
service firms are defined as those whose annual receipts are less than 
$5,000,000.
    Last year, as a percentage, about 34 percent of the handlers 
shipped over $5,000,000 worth of dried prunes and 66 percent of the 
handlers shipped under $5,000,000 worth of prunes. In addition, based 
on production, producer prices, and the total number of dried prune 
producers provided by the Committee, the average annual producer 
revenue is approximately $136,000. The majority of handlers and 
producers of California dried prunes may be classified as small 
entities.
    This proposed rule would establish an undersized prune regulation 
of 24/32 of an inch in diameter for French prunes and 30/32 of an inch 
in diameter for non-French prunes for the 1998-99 crop year for volume 
control purposes. This change in regulation would result in more of the 
smaller sized prunes being classified as undersized prunes, and is 
expected to benefit producers, handlers, and consumers. The prune 
industry currently uses a ``D'' screen (24/32 of an inch in diameter 
for French prunes and 30/32 of an inch in diameter for non-French 
prunes) for separating small prunes from the larger sizes. Thus, 
producers and handlers, both small and large, would not incur extra 
costs from having to purchase new screen sizes. Moreover, because the 
quality related undersized regulation has been in place continuously 
since the early 1980's, the only additional cost resulting from the 
increased openings would be the disposal of additional undersized prune 
tonnage (about 1,600 natural condition tons) to nonhuman consumption 
outlets as required by the order. With the less restrictive openings, 
only 5,686 natural condition tons or 3.4 percent of the marketable 
production has been removed on average over the past seven crop years 
since 1990-91. Since the benefits and costs of the proposed action 
would be directly proportional to the quantity of ``D'' screen prunes 
produced or handled, small businesses should not be disproportionately 
affected by the proposal. Sugar content, prune density, and dry-away 
ratio vary from county-to-county, from orchard-to-orchard, and from 
season-to-season in the major producing areas of the Sacramento and San 
Joaquin Valleys. These areas account for over 99 percent of the State's 
production, and the prunes produced are homogeneous enough so that the 
proposal would not be inequitable to producers, both large and small, 
in any area of the State.
    The quantity of small prunes in a lot is not dependent on whether a 
producer or handler is small or large, but is primarily dependent on 
cultural practices, soil composition, and water costs. The cost to 
minimize the quantity of small prunes is similar for small and large 
entities. The anticipated benefits of this rule are not expected to be 
disproportionately greater or lesser for small handlers or producers 
than for larger entities. While this proposed rule may initially impose 
some additional costs on producers and handlers, the costs are expected 
to be minimal, and would be offset by the benefits derived by the 
elimination of some of the excess supply of small sized prunes.
    At the November 18, 1997, meeting, the Committee discussed the 
impact of this change on handlers and producers in terms of cost. 
Handlers and producers receive higher returns for the larger size 
prunes. According to industry members, the small size prunes being 
eliminated through this rule have very little value. As mentioned 
earlier, the current situation for these small sizes is quite bleak 
with producers losing money on every ton they deliver to handlers. The 
1997 grower field price for ``D'' screen prunes is ranging between $40 
and $50 per ton. The cost of drying a ton of such prunes is $260 per 
ton at a 4 to 1 dry-away ratio, the cost to haul these prunes is at 
least $20 per ton, and the producer assessment that must be paid to the 
California Prune Board (a body which administers the State marketing 
order for promotion) is $30 per ton. The total cost is about $310 per 
ton which equates to a loss of about $260 per ton for every ton of 
``D'' screen prunes produced and delivered to handlers.
    The proposed rule is expected to benefit all producers and handlers 
by eliminating the smallest, least valuable prunes from the crop. This 
is expected to help reduce the oversupply situation and lessen the 
downward pressure on small prune prices to producers. Further, 
producers may alter their cultural practices to grow the larger sizes 
needed by the industry to meet the market demand for pitted prunes.
    Utilizing data provided by the Committee, the Department has 
evaluated the impact of the proposed undersized regulation change upon 
producers and handlers in the industry. The analysis shows that a 
reduction in the marketable production and handler inventories would 
result in higher season-average prices which would benefit all 
producers. The removal of the smallest least desirable of the 
marketable dried prunes produced in California from human consumption 
outlets would eliminate an estimated 7,300 tons of small-sized dried 
prunes during the 1998-99 crop year from the marketplace. This would 
help lessen the negative marketing and pricing effects resulting from 
the excess supply situation facing the industry. California prune 
handlers reported that they held 102,386 tons of natural condition 
prunes on July 31, 1997, the end of the 1996-97 crop year. This was the 
largest year-end inventory reported since the Committee began 
collecting such statistics in 1949. The desired inventory level, which 
is based on an average 12-week supply deemed desirable to keep trade 
distribution channels full while awaiting new crop, is 40,991 natural 
condition tons. This leaves an inventory surplus of over 61,000 tons 
which will likely take the industry several years to market.
    Further burdening this oversupply situation will be larger 
California prune crops over the next few years caused by the new prune 
plantings of recent years and higher yields per acre. During the 1990-
91 crop year, the non-bearing acreage totaled 5,900 acres, but by 1996-
97, the non-bearing acreage had quadrupled to more than 23,000 acres. 
Yields have ranged from 2.3 to 2.8 tons to the acre over the most 
recent three-year period, compared to a 10-year average of 2.2 tons to 
the acre. The 1997-98 crop is expected to be 215,000 natural condition 
tons which will add to the existing oversupply. Barring unforeseen 
circumstances, the 1998-99 crop may be larger further worsening the 
industry's oversupply problems.
    As the marketable dried prune production and surplus prune 
inventories are reduced through this proposal, the trade should begin 
taking a position early in the season for their dried prune needs, 
which would help firm up market prices and eventually reflect a higher 
overall price to the

[[Page 9163]]

producers. In addition, as producers implement improved cultural and 
thinning practices, the overall size of the prunes will get larger. As 
a result, producer returns would increase because producers will no 
longer be receiving $40-50 per ton for the small-sized fruit at a $260-
270 per ton loss, but be receiving the higher prices paid for the 
larger sizes.
    For the 1992-93 through the 1996-97 crop years, the season average 
price received by the producers ranged from a high of $1,121 per ton to 
a low of $838 per ton during the 1996-97 crop year. The season average 
price received by producers averaged about 60 percent of parity during 
the 1992-93 through 1996-97 crop years. Based on available data and 
estimates of prices, production, and other economic factors, the season 
average producer price for the 1997-98 and 1998-99 seasons is expected 
to be below $800 per ton, or about 40 percent of parity.
    The Committee discussed alternatives to this change, including 
making no changes to the undersized prune regulation and allowing 
market dynamics to foster prune inventory adjustments through lower 
prices on the smaller prunes. While reduced grower prices for small 
prunes are expected to contribute toward a slow reduction in dried 
prune inventories, the Committee believed that the undersized rule 
change was needed to expedite that reduction. With the excess tonnage 
of dried prunes, the Committee also considered establishing a reserve 
pool and diversion program to reduce the oversupply situation. These 
initiatives were not supported because they would not specifically 
eliminate the smallest, least valuable prunes which are in oversupply. 
Instead the reserve pool and diversion program would eliminate larger 
size prunes from human consumption outlets. Reserve pools for prunes 
have historically been implemented on dried prunes regardless of the 
size of the prunes. While the marketing order also allows handlers to 
remove the larger prunes from the pool by replacing them with small 
prunes and the value difference in cash, this exchange would be 
cumbersome and expensive to administer compared to the proposal.
    Section 8e of the Act requires that when certain domestically 
produced commodities, including prunes, are regulated under a Federal 
marketing order, imports of that commodity must meet the same or 
comparable grade, size, quality, or maturity requirements for the 
domestically produced commodity. This action does not impact the dried 
prune import regulation because the action to be implemented is for 
volume control, not quality control, purposes. The smaller diameter 
openings of 23/32 of an inch for French prunes and 28/32 of an inch for 
non-French prunes were implemented for the purpose of improving product 
quality. The recommended increases to 24/32 of an inch in diameter for 
French prunes and 30/32 of an inch in diameter for non-French prunes 
are for purposes of volume control. Therefore, the increased diameters 
would not be applied to imported prunes.
    This action would not impose any additional reporting or 
recordkeeping requirements on either small or large California dried 
prune handlers. 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.
    In addition, the Committee's meeting was widely publicized 
throughout the prune industry and all interested persons were invited 
to attend the meeting and participate in Committee deliberations on all 
issues. Like all Committee meetings, the November 18, 1997, meeting was 
a public meeting and all entities, both large and small, were able to 
express views on this issue. The Committee itself is composed of 
twenty-two members, of which seven are handlers, fourteen are 
producers, and one is a public member. The majority of the producer and 
handler members are small entities. Moreover, the Committee and its 
Supply Management Subcommittee have been reviewing this supply 
management problem for almost a year, and this proposed rule reflects 
their deliberations completely. Finally, interested persons are invited 
to submit information on the regulatory and informational impacts of 
this action on small businesses.
    A 30-day comment period is provided to allow interested persons to 
respond to this proposal. Thirty days is deemed appropriate because 
this rule, if adopted, needs to be in place as soon as possible so that 
handlers and producers will be informed of any regulation for the 1998-
99 crop year (beginning August 1, 1998). Producers would need time to 
thin prune-plums in order to obtain larger sizes. Producers generally 
begin thinning in late April. All written comments timely received will 
be considered before a final determination is made on this matter.

List of Subjects in 7 CFR Part 993

    Marketing agreements, Plums, Prunes, Reporting and recordkeeping 
requirements.
    For the reasons set forth in the preamble, 7 CFR part 993 is 
proposed to be amended as follows:

PART 993--DRIED PRUNES PRODUCED IN CALIFORNIA

    1. The authority citation for 7 CFR part 993 continues to read as 
follows:

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

    2. A new Sec. 993.405 is added to read as follows:


Sec. 993.405  Undersized prune regulation for the 1998-99 crop year.

    Pursuant to Secs. 993.49(c) and 993.52, an undersized prune 
regulation for the 1998-99 crop year is hereby established. Undersized 
prunes are prunes which pass through openings as follows: for French 
prunes, 24/32 of an inch in diameter; for non-French prunes, 30/32 of 
an inch in diameter.

    Dated: February 17, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-4595 Filed 2-23-98; 8:45 am]
BILLING CODE 3410-02-P