[Federal Register Volume 63, Number 117 (Thursday, June 18, 1998)]
[Rules and Regulations]
[Pages 33237-33243]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-16269]


-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Parts 997 and 998

[Docket Nos. FV97-997-1 FIR and FV97-998-1 FIR]


Peanuts Marketed in the United States; Relaxation of Handling 
Regulations

AGENCY: Agricultural Marketing Service (AMS), USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Department of Agriculture (Department) is adopting, as a 
final rule, with modifications, the provisions of an interim final rule 
(IFR) that relaxed for 1997 and subsequent crop peanuts, several 
provisions regulating the handling of domestically produced peanuts 
marketed in the United States. This finalization continues the IFR's 
improved efficiency and reduced program costs resulting in a similar 
reduction in assessments charged Agreement signer and non-signer 
handlers.

EFFECTIVE DATE: June 19, 1998.

FOR FURTHER INFORMATION CONTACT: George J. Kelhart or Jim Wendland, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, P.O. Box 96456, room 2525-S, Washington, D.C. 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, P.O. Box 96456, room 2525-S, Washington, D.C., 
20090-6456; telephone: (202) 720-2491, Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement No. 146 (Agreement)(7 CFR part 998) and the Agricultural 
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), 
hereinafter referred to as the ``Act.'' The Agreement and the 
regulations issued thereunder and the non-signatory peanut handler 
regulations (7 CFR part 997) regulate the quality of domestically 
produced peanuts.
    The Department is issuing this final 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 rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule. There are no administrative procedures which must be exhausted 
prior to any judicial challenge to the provisions of this rule.
    Following explanation of each change to the Agreement's regulation, 
the corresponding change to the non-signatory handlers' regulation is 
discussed.

Incoming Regulations

Farmers Stock Storage and Handling Facilities

    The Peanut Administrative Committee (Committee) recommended 
amending Sec. 998.100 Incoming quality regulation for 1996 and 
subsequent crop peanuts by removing paragraph (g) Farmers Stock Storage 
and Handling Facilities which previously regulated the condition of 
such facilities and authorized Committee inspection. The Committee 
recommended the change to save approximately $450,000, by eliminating 
the positions of the seven fieldmen whose specified duties through the 
1996 crop year included spending an estimated 60-65 percent of their 
time inspecting and approving such facilities. The vote was 17 ``For'' 
and 1 ``Against'', with the dissenting voter contending that the 
fieldmen were providing valuable services, their positions should not 
be eliminated, and that inspection and approval of such facilities by 
the Committee staff were important. Handlers contended they were 
already paying their own employees to do facilities inspections and the 
cost of such duplication of effort needed to be eliminated and the 
Department issued the change. Also, this cost-cutting has not adversely

[[Page 33238]]

affected quality since peanuts must still meet the Outgoing Quality 
Regulation.
    Elimination of the regulatory provision has allowed the Committee 
to reduce its non-headquarters staff from seven to one compliance 
officer in each of the three production areas and reduce the current 
``fieldmen'' staffing costs to zero. The compliance officers are 
conducting compliance audits of Agreement signers similar to AMS 
approved non-signer program compliance plan procedures, where AMS 
Compliance Staff auditors check non-signers' records. A revised 1997-98 
compliance plan from the Committee includes these new procedures. AMS 
believes this will continue to assure compliance under the Agreement.
    The non-signer regulation contains no similar requirements for 
inspection and approval of such facilities, so no change is needed to 
it.

Outgoing Regulations

    The Committee unanimously recommended that Sec. 998.200(a) be 
amended to provide that minimum grade requirements for lots of 
``splits'' (the separated halves of peanut kernels) be modified to 
correspond with ``United States Standards For Grades Of: (1) Cleaned 
Virginia Type Peanuts In The Shell; or (2) Shelled Runner Type Peanuts; 
or (3) Shelled Spanish Type Peanuts; or (4) Shelled Virginia Type 
Peanuts'' (7 CFR part 51: Sections 51.1235-1242; 51.2710-2721; 51.2730-
2741; and 51.2750-2763, respectively). The increase to 2.00 percent 
from the prior 1.50 percent for unshelled peanuts and damaged kernels 
was needed to provide consistency with the grade standards. Under the 
former regulation, a handler could have had a lot of peanuts which met 
U.S. Grade Standards for U.S. Splits, but failed to meet Agreement 
requirements for edible quality. It was initially expected that this 
change might reduce the number of lots needing remilling to meet 
outgoing quality requirements by less than 10 percent if it was an 
average year. But the 1997 crop has been stressed by drought conditions 
and the industry in virtually all peanut producing States has expressed 
having some problems with quality. Thus, this change is now expected to 
reduce handlers' need to remill by more than 10 percent during the 1997 
crop year, saving an estimated $30 on each ton not needing to be 
remilled.
    The only comment received concerning the IFR, filed by the 
Committee, dealt with Sec. 998.200(a). The Committee urged that 
portions of Table 2 INDEMNIFIABLE GRADES, which had been removed by the 
IFR, be restored by adding them to the MAXIMUM LIMITATIONS table. The 
IFR modification inadvertently eliminated all nine of the INDEMNIFIABLE 
GRADE categories. The Committee said its intent was to cause all edible 
grade categories of peanuts to be eligible for indemnification, not to 
eliminate any grade categories. Three of the grade categories--Runner 
with splits, Virginia with splits, and Spanish and Valencia with 
splits--are not included in the U.S. grade standards for peanuts. 
``Runner with splits'' exists under the American Peanut Shellers 
Association's specifications but not the other categories. Therefore, 
the three not included in the grade standards need to be restored, for 
convenient use by the peanut industry, since such peanuts still have a 
domestic market niche. Federal Government Commodity Procurement 
Program, Farm Service Agency's Commodity Operations Division and many 
commercial firms had used these grade categories in contract 
specifications to purchase such peanuts. Also, to be consistent with 
the other maximum tolerances in the ``Unshelled peanuts and damaged 
kernels'' column and the ``Unshelled peanuts and damaged kernels and 
minor defects'' column, the percentage tolerances for the three 
restored categories need to be relaxed to 1.50 percent from 1.25 and to 
2.50 percent from 2.00, respectively. Therefore, the three ``* * * with 
splits'' type and grade categories and their relaxed tolerances need to 
be incorporated into the MAXIMUM LIMITATION table in Sec. 998.200(a) 
and Sec. 997.30(a). This simplifies grade requirements by having only 
one set of quality requirements for human consumption use. The 
Department agrees with the comment and includes the changes in this 
finalization of the IFR. This relaxation in tolerances will reduce the 
number of lots that need to be reconditioned to meet outgoing quality 
requirements. This will save signer handlers reconditioning and storage 
costs.
    Similar changes are made to the corresponding Sec. 997.30(a) of the 
non-signer regulation, with proportional savings on such handlers' much 
smaller volume.
    The Committee unanimously recommended that Sec. 998.200(h)(1) be 
amended to allow lots of peanuts which fail edible quality 
requirements, due to excessive fall through, to be custom blanched. 
However, such lots will have to be certified as meeting minimum ``fall 
through'' requirements after blanching. This finalization continues the 
elimination of the former requirement that prior to movement of such 
peanuts, handlers had to submit a form to the Committee and receive 
authorization for movement and blanching of each such lot.
    Section 997.40(d) of the non-signer regulation currently does not 
require such handlers to submit a request to the Department and receive 
authorization for movement and blanching of each such lot. Therefore, 
no similar change to that provision is needed. However, this 
finalization continues the IFR's amendment which added ``fall through'' 
to the category of items allowed in the first and third sentences.
    The Committee also unanimously recommended a further change to 
paragraph (h), specifically that subparagraphs (h)(1) and (h)(2) be 
further amended to provide that reject peanuts may be placed in 
suitable containers acceptable to the Committee. The current 
requirement specifies ``bagged'', which refers to the older standard-
sized burlap bags, which hold approximately 110 pounds. It does not 
include the many newer and more efficient containers which are easier 
to handle such as tote bags, corrugated containers (including those 
with capacities of over a ton), Super Sacks, and other various company 
containers used by individual peanut product manufacturers. This 
finalization will continue the IFR's change which allowed handlers to 
use more efficient containers or those desired by their customers. For 
purposes of this provision, most any container that handlers use will 
be considered suitable.
    Section 997.40(c) of the non-signer regulation previously provided 
for ``in bulk or bags or other suitable containers.'' This finalization 
continues the IFR's change to make it consistent with the Agreement's 
amended regulation, by removing the words ``in bulk or.'' The same 
applies to paragraphs (d) and (e) which were amended by removing the 
word ``bagged'' and replacing it with the words ``placed in suitable 
containers.''
    The Committee also unanimously recommended that Sec. 998.200 
Outgoing quality regulation and Sec. 998.300 Terms and conditions of 
indemnification * * * be amended to make all lots of edible quality 
peanuts indemnifiable, for freight reimbursement, when rejected on 
appeal after being certified ``negative'' as to aflatoxin. This 
finalization continues the IFR's changes to provisions specified in 
Sec. 998.300, making product claim lots of edible quality peanuts also 
indemnifiable. This involves lots where a handler sustained a loss as a 
result of a buyer withholding

[[Page 33239]]

from human consumption any or all of the product made from a lot of 
peanuts which had been determined to be unwholesome due to aflatoxin 
after such lot had originally been certified ``negative'' as to 
aflatoxin. This change provided consistency by treating all edible 
quality peanuts equally, whether appeal claims or product claims. 
Although these changes have further reduced costs and promoted 
uniformity in the handling of indemnification of all edible quality 
peanuts, there is no way to accurately quantify how much these 
reductions have been, because the savings are different for each 
handler. However, the total savings are expected to be a minor fraction 
of the projected approximately $350,000 total 1997 crop indemnification 
costs.
    The non-signer enabling legislation does not provide authority for 
indemnification. Therefore, no similar change was needed in the non-
signer regulation.
    The Committee further unanimously recommended that 
Sec. 998.200(h)(3) be amended to provide that peanuts which have been 
certified as meeting minimum grade requirements specified in 
Sec. 998.200(a)(1), but fail to meet requirements for aflatoxin, may be 
roasted while being blanched prior to being certified as meeting the 
aflatoxin requirements. After roasting, such peanuts must be sampled 
and assayed for aflatoxin content but do not have to be re-sampled and 
analyzed for grade again. This simplified process was recommended by 
the Committee and issued in the IFR by the Department. Prior to the 
IFR, such blanched peanuts, after certification, were often returned to 
the blancher for additional heating. This finalization continues the 
IFR's favorable effects of not having to remove the blanched peanuts 
short of the complete roasting process for sampling and aflatoxin 
analysis, and then running them back through the blancher again. This 
added costs to the roasting process and usually caused additional, 
unintentional damage due to the extra handling of the kernels. Also, 
the roasting enhances the blanching efforts to eliminate aflatoxin, 
thus improving the wholesomeness, quality and value of such shelled 
peanuts. The savings involved in blanching and roasting in one step may 
often outweigh the approximately $40 per hour costs of having an 
inspector present during this process to maintain needed positive lot 
identification. Any residual peanuts, excluding skins and hearts, 
resulting from this roasting process, must be red tagged and disposed 
of to inedible peanut outlets. The same factors apply to Sec. 997.40(d) 
of the non-signer regulation.
    This finalization continues the IFR's provision that unchanged 
portions of the incoming and outgoing regulations that were in effect 
for 1996 and subsequent crop peanuts will remain in effect for 1997 and 
subsequent crop peanuts.
    An interim final rule concerning this action was published in the 
Federal Register on January 16, 1998 (63 FR 2846). A 60-day comment 
period, which ended on March 17, 1998, was provided to allow interested 
persons to respond to the interim final rule. One comment was received 
during the comment period. That comment was discussed earlier in this 
document, as a part of the discussion of changes in the regulations.

The Regulatory Flexibility Act and Effects on Small Businesses

    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 the small businesses 
will not be unduly or disproportionately burdened. Marketing agreements 
and 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 27 signatory and 30 non-signatory peanut 
handlers who are currently subject to regulations under the Agreement 
and non-signer program respectively and approximately 25,000 commercial 
peanut producers in the 16-State production area. Small agricultural 
service firms, which include handlers, have been defined by the Small 
Business Administration (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. 
Approximately 25 percent of the signatory handlers, virtually all of 
the non-signers, and most of the producers may be classified as small 
entities. This action will be favorable to the industry by tending to 
improve efficiency, reduce costs, and increase returns.
    This finalization will continue the IFR's relaxations to handling 
regulations by simplifying requirements; thus, enabling handlers, both 
large and small, to cut costs and more efficiently handle their peanut 
supplies, without jeopardizing safeguard requirements in the current 
regulations.
    The relaxations included:
    1. The elimination of the requirement for inspection and approval 
of farmers stock storage and handling facilities has saved 
approximately $450,000 by eliminating the positions of the seven 
fieldmen, who had performed this activity through last crop year. 
Handlers contended they were already paying their own employees to do 
this and that the duplicate cost should be eliminated;
    2. Relaxing the minimum grade requirements for ``splits'' to 
correspond with U.S. grade standards will likely reduce the number of 
lots which need to be remilled during the 1997 crop by 10 percent, due 
to stressed growing conditions in virtually all areas. This should 
result in significant reductions in handlers' costs;
    3. Another IFR relaxation provided that all lots of edible quality 
peanuts, whether appeal claims or product claims, are eligible for 
Agreement signer handlers' indemnification benefits. Thus, such 
handlers with product claim lots are also eligible for reimbursement of 
most transportation expenses on such lots. Such additional 
reimbursement was not publicly quantified by the Committee, but is a 
minor portion of its projected $350,000 total 1997 crop indemnification 
costs;
    4. The IFR's relaxed provision to allow lots which fail edible 
quality requirements, due to excessive fall through, to be custom 
blanched eliminates the previous requirement that handlers had to 
submit a form to the Committee and receive authorization for movement 
and blanching of each such lot. This relaxation has eliminated 
unnecessary paperwork and saved time for all affected handlers;
    5. Relaxing the previous requirement that peanuts be ``bagged'' 
(i.e., placed only in older standard-size burlap bags holding 
approximately 110 pounds) by allowing the use of suitable containers, 
which permits use of the many newer and more efficient containers or 
those desired by handlers' customers; and
    6. Another relaxation allowed peanuts which had been certified as 
meeting the minimum grade requirements, but failed to meet requirements 
for aflatoxin, to be roasted while being blanched prior to being 
certified as meeting the aflatoxin requirements. This simplified 
process eliminated running such peanuts back through the blancher again 
for roasting, which doubled the processing costs and tended to lower 
the peanuts' quality and value by causing additional damage to

[[Page 33240]]

them. Such savings may outweigh the approximately $40 per hour expense 
of having an inspector present to maintain needed positive lot 
identification.
    The IFR's relaxed requirements have significantly improved 
efficiency and enabled the Committee to cut in half its 1997 crop year 
administrative budget and assessment rate charged Agreement signer and 
non-signer handlers to finance their respective programs. The rate of 
assessment for the 1996 crop year was $0.70 per net ton of assessable 
peanuts. The rate for the 1997 crop year was reduced to $0.35 per net 
ton by an earlier rulemaking action, as published in the September 17, 
1997, issue of the Federal Register (62 FR 48749). This lower rate 
saved regulated domestic handlers approximately $500,000 in 
administrative assessment costs which, to a great extent, was made 
possible by the IFR's relaxation actions.
    The finalization continues the IFR's specifics of each change and 
why they tended to increase returns to handlers, which were covered in 
detail near the beginning of this rule under the discussion starting 
with ``Incoming regulations.'' These IFR changes relaxed requirements 
on regulated domestic peanut handlers, improved their efficiency and 
cut costs, and benefitted the peanut industry, manufacturers, and 
consumers, while still assuring the quality of all peanuts in domestic 
human consumption markets.
    As with all Federal marketing agreement and order programs, reports 
and forms are periodically reviewed to reduce information requirements 
and duplication by industry and public sectors. Consistent with the 
Paperwork Reduction Act (44 U.S.C. Chapter 35), the Committee 
unanimously recommended greatly reducing reporting and recordkeeping 
requirements on both large and small peanut handlers regulated under 
the Agreement. It has eliminated 20 of the 21 Committee forms 
previously approved by the Office of Management and Budget (OMB) that 
might accompany peanut shipments, to only require the use of the Form 
PAC-1. The PAC-1 is mailed to handlers on a monthly basis and is used 
to report receipts and acquisitions of farmers stock peanuts and to 
remit assessments. It is estimated that this has eliminated 95 percent 
(or about 2,291 hours and assuming $10 per hour, saving respondents 
nearly $23,000 in costs) of the previous estimated 2,417 hours of total 
reporting burden on Agreement signers, including small businesses, and 
a proportional reduction in non-signers' smaller reporting burdens. A 
notice of the proposed revision was published in the July 31, 1997, 
issue of the Federal Register (62 FR 41021). Sixty days were allowed 
for comments. One comment was received, from the American Peanut 
Shellers Association, supporting the reduced burdens. This information 
collection package was approved by the OMB under OMB Control No. 0581-
0067.
    In addition, the Department has not identified any Federal rules 
that duplicate, overlap, or conflict with this finalization.
    Further, the Committee's meeting was widely publicized throughout 
the peanut industry and all interested persons were invited to attend 
the meeting and participate in the Committee's deliberations. Like all 
Committee meetings, the April 29-30, 1997, meeting was a public meeting 
and all entities, both large and small, were able to express their 
views on the issues. The 18-member Committee is composed of an equal 
number of peanut handlers and producers, the majority of whom are small 
entities.
    Also, the Committee has a number of appointed subcommittees to 
review certain issues and make recommendations to the Committee. The 
Committee's Regulations, Indemnification and Quality Subcommittee and 
``New Concept'' Subcommittee met on January 28, 1997, and discussed 
these issues in detail. On March 25, 1997, the Committee held an 
informational meeting to hear a presentation by the National Peanut 
Council's Peanut Industry Revitalization Project Steering Committee and 
discuss the issues and then take back to discuss with their industry 
peers, before voting on those issues at the April Committee meeting. 
The Committee's Administrative Budget Subcommittee also met March 25, 
1997, to discuss budget recommendations. All of these meetings were 
public meetings and both large and small entities were able to 
participate and express their views.
    An objective of the two domestic programs is to ensure that only 
high quality and wholesome peanuts enter human consumption markets in 
the United States. About half of the domestic commercial handlers, 
handling approximately 95 percent of the crop volume, have signed the 
Agreement. The other half are non-signatory handlers handling the 
remaining 5 percent of the domestic production.
    Under these regulations, farmers stock peanuts with visible 
Aspergillus flavus mold (the principal source of aflatoxin) are 
required to be diverted to inedible uses. Each lot of milled peanuts 
must be sampled and the samples chemically analyzed for aflatoxin 
content. Costs to administer the Agreement and to reimburse the 
Department for oversight of the non-signatory program are paid by an 
administrative assessment levied on handlers in the respective 
programs.
    The 18-member Committee, which is composed of an equal number of 
peanut producers and handlers, meets at least annually to review the 
Agreement's rules and regulations, which are effective on a continuous 
basis from one crop year to the next which begins July 1. Committee 
meetings are open to the public, and interested persons may express 
their views at these meetings. The Department evaluates Committee 
recommendations, as well as information from other sources, prior to 
making any recommended changes to the regulations under the Agreement.
    Section 608b of the Act was amended in 1989 to require that all 
peanuts handled by persons who have not entered into the Agreement 
(non-signers) be subject to the same quality and inspection 
requirements to the same extent and manner as are required under the 
Agreement. Section 608b was further amended in 1993 to impose similar 
requirements regarding administrative assessments. The non-signatory 
handler regulations have been amended several times thereafter and are 
published in 7 CFR part 997.
    Thus, the Committee's recommended changes to the Agreement signers' 
regulations, as finalized in this rule, also are finalized for the non-
signers' regulations. This finalization of an IFR identifies the 
corresponding change to the non-signers' regulations for each change to 
the Agreement regulations.
    According to the Committee, the domestic peanut industry has been 
undergoing a period of great change. The Committee bases its view, in 
part, on findings in a recent study entitled ``United States Peanut 
Industry Revitalization Project'' developed by the National Peanut 
Council and the Department's Agricultural Research Service (May 1996).
    According to that study, the U.S. peanut industry has been in a 
period of dramatic economic decline since 1991 because: (1) Per capita 
peanut consumption has steadily declined a total of 11 percent; (2) 
harvested acreage has declined 25 percent; (3) production has declined 
30 percent and farm value dropped 29 percent; and (4) imports of 
peanuts and peanut products have increased from insignificant 
quantities to 48,736 raw farmer stock tons in 1995, and to 55,536 in 
1996.
    That study points to recent increases in the duty-free import quota 
for raw peanuts due to the North American

[[Page 33241]]

Trade Agreement (NAFTA) and the Uruguay Round Agreements under the 
General Agreement on Tariffs and Trade (GATT). Under Section 22 import 
quota provisions, the volume of U.S. peanut imports had been limited to 
about 2.3 million pounds, in-shell basis, annually. Thus, imports have 
historically represented about one-tenth of 1 percent of U.S. food use 
of peanuts. Under NAFTA, Mexico has been granted a minimum access level 
for duty-free entry of peanuts of about 10 million pounds, in-shell 
basis. This level will increase about 3 percent annually through 2008, 
when quantitative limits will cease. Mexico's 1998 duty-free quota will 
total 8.4 million pounds. Under GATT, the 1997 quota was 86.8 million 
pounds, has increased to 96.8 million pounds (Argentina 81.3 & all 
other 15.5) in 1998, and can grow to about 125 million pounds in the 
year 2000.
    The study also projects that farm production costs and revenue will 
be equal by the year 2000, as will handler costs and revenue, leaving 
no profit.
    In addition, the modification of the Federal farm peanut poundage 
quota regulations implemented under the Agricultural Market Transition 
Act of 1996 (1996 Act) has resulted in the domestic industry undergoing 
significant changes scheduled to continue through the year 2002. The 
peanut support price has been reduced from $670 per ton in 1995 to $610 
per ton through 2002. The USDA's Farm Service Agency final rule 
implementing the Act was published May 9, 1997, (62 FR 25433). That 
rule indicates that economic impacts of the 1996 Act include expected 
reductions in domestic peanut producers' revenue of $1.25 billion from 
1996 through 2002. Quota lease holders could absorb a loss of about $40 
million annually because of reduced leasing rates due to the lower 
peanut price support. Also, capitalized value of quotas could decline 
$200 to $300 million, thus reducing land values and the tax base of 
rural communities.
    The Committee agrees that all of these factors combined show that 
the domestic peanut industry is in decline and that the outlook is not 
expected to change without some positive intervention by the industry.
    World supply and demand are less important for peanuts than most 
U.S. farm commodities. Much of the world peanut production is for non-
food uses, although production for food use might increase a little if 
there were no U.S. import restrictions. Also, import quotas, though 
increased recently, still are set at relatively low levels.
    Domestic peanut production in 1996 was approximately 3.66 billion 
pounds, with a farm value of slightly under $1 billion. The Department 
reports U.S. peanut production in 1997 totaled 3.54 billion pounds, 
down 3 percent from the 1996 crop. Harvested acreage for 1997 was 1.41 
million acres, up 2 percent from 1996. USDA estimates that acreage will 
increase by 3 percent in 1998. The U.S. yield per harvested acre for 
1997 averaged 2,507 pounds, down 146 pounds from 1996. The 1997 
marketing year average price received by farmers for peanuts is 26.4 
cents per pound, down 1.7 cents from 1996. The value of peanut 
production for the 1997 crop is reported as $932 million, down 9 
percent from a year earlier.
    Production is expected to gradually increase to the year 2002 
because domestic food use is projected to rise about 1.5 percent 
annually. Imports are expected to remain at a relatively small 
percentage of total U.S. peanut use.
    Estimated exports of 750 million pounds in Marketing Year (MY) 1997 
are below the average for the prior 3 years, but are 11 percent more 
than a year earlier. Peanut oil prices are expected to average about 38 
cents a pound of oil in MY 1997, 6 percent lower than MY 1996 as 
vegetable oil supplies return to more normal levels. Peanut meal prices 
for MY 1997 are expected to decline to $175 a ton, down 25 percent from 
MY 1996 because of larger soybean meal supplies.
    The 28.5 cents per pound season average price of farmer stock 
peanuts for MY 1997 was the lowest price of the last two years and 
reflects the adjustment to the reduced quota support level and an 
unexpected change in the proportions of quota and additionals in 1997 
production. Average prices to growers are expected to increase, but 
will remain below 1995 prices because of the lower quota price support 
level. The value of farm production is expected to gradually rise and 
surpass that of 1995 by 2000/01.
    The IFR changes of the Agreement's Incoming and Outgoing 
regulations for 1997 and subsequent crop peanuts being finalized in 
this rule were recommended by the Committee at its April 29-30, 1997, 
public meeting.

Alternative Actions Considered

    Although the Committee could have recommended no changes or less 
changes to the current regulations, it unanimously concluded that those 
were not satisfactory solutions. It believes that all possible 
simplification and cost-cutting should be done and that these 
regulations should focus more on outgoing quality and less on the 
shelling and milling processes necessary to meet the outgoing, human 
consumption requirements. Newer, high technology milling and blanching 
equipment enable handlers to recondition failing peanut lots that could 
not have been economically reconditioned when the regulations were 
first promulgated. Therefore, it is no longer necessary to impose 
restrictions that hinder the efficiency of handling operations and 
result in the loss of potentially good quality peanuts. Thus, the 
Committee believes this finalization will tend to improve the returns 
to growers and handlers, while still maintaining consumer safeguard 
provisions in the current domestic regulations, because all peanuts 
intended for human consumption must still be inspected and certified 
acceptable for such use.
    After review of the recommendations and comment of the Committee, 
the Department concurs that this finalization of the changes will tend 
to improve returns to the industry and be in the public interest. 
Expected benefits of the changes were covered in the previous 
discussion of each individual change.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35) information collection requirements that are contained in 
this rule have been previously approved by the OMB and have been 
assigned OMB Nos. 0581-0067 (for Agreement signers) and 0581-0163 (for 
non-signers).
    One comment concerning the IFR was received during the 60-day 
comment period. That comment was discussed earlier in this document, as 
a part of the discussion of changes in the regulations.
    After consideration of all relevant material presented, including 
the Committee's recommendations and comment, and other information, it 
is found that finalizing the IFR with changes, as hereinafter set 
forth, will tend to effectuate the declared policy of the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because this final rule adopts with 
appropriate changes the provisions of the interim final rule; based 
upon a comment received, the provisions of the interim final rule have 
been modified; this rule relaxes several provisions of the regulations; 
and the end of the 1997-98 crop year is June 30, 1998.

[[Page 33242]]

List of Subjects

7 CFR Part 997

    Food grades and standards, Peanuts, Reporting and recordkeeping 
requirements.

7 CFR Part 998

    Marketing agreements, Peanuts, Reporting and recordkeeping 
requirements.

    Accordingly, the interim final rule amending 7 CFR parts 997 and 
998 which was published in the Federal Register at 63 FR 2846 on 
January 16, 1998, is adopted as a final rule with the following 
changes:

PART 997--PROVISIONS REGULATING THE QUALITY OF DOMESTICALLY 
PRODUCED PEANUTS HANDLED BY PERSONS NOT SUBJECT TO THE PEANUT 
MARKETING AGREEMENT

    1. The authority citation for 7 CFR part 997 continues to read as 
follows:

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

    2. In Sec. 997.30, in paragraph (a)(1), the ``Maximum Limitations'' 
table is revised to read as follows:


Sec. 997.30  Outgoing regulation.

* * * * *

                                                                   Maximum Limitations                                                                  
                                                             [Excluding lots of ``splits'']                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Unshelled                              Fall through                                                     
                                   Unshelled     peanuts,  --------------------------------------------------------------------                         
                                    peanuts      damaged                                                                          Foreign               
     Type and grade category          and      kernels and                                                                       materials     Moisture 
                                    damaged        minor      Sound split and    Sound whole kernels            Total            (percent)    (percent) 
                                    kernels      defects       broken kernels                                                                           
                                   (percent)    (percent)                                                                                               
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner..........................         1.50         2.50  3.00%; \17/64\ inch  3.00%; \16/64\  x    4.00% Both screens......          .20         9.00
                                                             round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
Virginia (except No. 2).........         1.50         2.50  3.00%; \17/64\ inch  3.00%; \15/64\  x    4.00% Both screens......          .20         9.00
                                                             round screen.        1 inch slot screen.                                                   
Spanish and Valencia............         1.50         2.50  3.00%; \16/64\ inch  3.00%; \15/64\  x    4.00% Both screens......          .20         9.00
                                                             round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
No. 2 Virginia..................         1.50         3.00  6.00%; \17/64\ inch  6.00%; \15/64\  x    6.00% Both screens......          .20         9.00
                                                             round screen.        1 inch slot screen.                                                   
Runner with splits (not more             1.50         2.50  3.00% \17/64\ inch   3.00% \16/64\  x     4.00% Both screens......          .10         9.00
 than 15% sound splits).                                     round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
Virginia with splits (not more           1.50         2.50  3.00% \17/64\ inch   3.00% \15/64\  x  1  4.00% Both screens......          .10         9.00
 than 15% sound splits).                                     round screen.        inch slot screen.                                                     
Spanish & Valencia with splits           1.50         2.50  3.00% \16/64\ inch   2.00% \15/64\  x     4.00% Both screens......          .10         9.00
 (not more than 15% sound                                    round screen.        \3/4\ inch slot                                                       
 splits).                                                                         screen.                                                               
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Lots of ``splits''                                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner (not more than 4% sound           2.00         2.50  3.00%; \17/64\ inch  3.00%; \14/64\  x    4.00% Both screens......          .20         9.00
 round whole kernels).                                       round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
Virginia (not less than 90%              2.00         2.50  3.00%; \17/64\ inch  3.00%; \14/64\  x    4.00% Both screens......          .20         9.00
 splits).                                                    round screen.        1 inch slot screen.                                                   
Spanish & Valencia (not more             2.00         2.50  3.00%; \16/64\ inch  3.00%; \13/64\  x    4.00%; Both screens.....          .20         9.00
 than 4% sound whole kernels).                               round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *


PART 998--MARKETING AGREEMENT REGULATING THE QUALITY OF 
DOMESTICALLY PRODUCED PEANUTS

    1. The authority citation for 7 CFR part 998 continues to read as 
follows:

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

    2. In Sec. 998.200, in paragraph (a)(1) the ``Maximum Limitation'' 
table is revised to read as follows:


Sec. 998.200  Outgoing quality regulation for 1997 and subsequent crop 
peanuts.

* * * * *

[[Page 33243]]



                                                                   MAXIMUM LIMITATIONS                                                                  
                                                             [Excluding lots of ``splits'']                                                             
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Unshelled                              Fall through                                                     
                                   Unshelled     peanuts,  --------------------------------------------------------------------                         
                                  peanuts and    damaged                                                                          Foreign               
     Type and grade category        damaged    kernels and                                                                       materials     Moisture 
                                    kernels       minor       Sound split and    Sound whole kernels            Total            (percent)    (percent) 
                                   (percent)     defects       broken kernels                                                                           
                                                (percent)                                                                                               
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner..........................         1.50         2.50  300%; \17/64\ inch   3.00%; \16/64\  x    4.00%...................          .20         9.00
                                                             round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
Virginia (except No. 2).........         1.50         2.50  3.00%; \17/64\ inch  3.00%; \15/64\  x    4.00% Both screens......          .20         9.00
                                                             round screen.        1 inch slot screen.                                                   
Spanish and Valencia............         1.50         2.50  3.00%; \16/64\ inch  3.00%; \15/64\  x    4.00% Both screens......          .20         9.00
                                                             round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
No. 2 Virginia..................         1.50         3.00  6.00%; \17/64\ inch  6.00%; \15/64\  x    6.00% Both screens......          .20         9.00
                                                             round screen.        1 inch slot screen.                                                   
Runner with splits (not more             1.50         2.50  3.00%; \17/64\ inch  3.00%; \16/64\  x    4.00% Both screens......          .10         9.00
 than 15% sound splits).                                     round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
Virginia with splits (not more           1.50         2.50  3.00%; \17/64\ inch  3.00%; \15/64\  x    4.00% Both screens......          .10         9.00
 than 15% sound splits).                                     round screen.        1 inch slot screen.                                                   
Spanish & Valencia with splits           1.50         2.50  3.00%; \16/64\ inch  2.00%; \15/64\  x    4.00% Both screens......          .10         9.00
 (not more than 15% sound                                    round screen.        \3/4\ inch slot                                                       
 splits).                                                                         screen.                                                               
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                   Lots of ``splits''                                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
Runner (not more than 4% sound           2.00         2.50  3.00%; \17/64\ inch  3.00%; \14/64\  x    4.00% Both screens......          .20         9.00
 whole kernels).                                             round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
Virginia (not less than 90%              2.00         2.50  3.00%; \17/64\ inch  3.00%; \14/64\  x    4.00% Both screens......          .20         9.00
 splits).                                                    round screen.        1 inch slot screen.                                                   
Spanish and Valencia (not more           2.00         2.50  3.00%; \16/64\ inch  3.00%; \13/64\  x    4.00% Both screens......          .20         9.00
 than 4% sound whole kernels).                               round screen.        \3/4\ inch slot                                                       
                                                                                  screen.                                                               
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *
    Dated: June 12, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-16269 Filed 6-17-98; 8:45 am]
BILLING CODE 3410-02-P