[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Proposed Rules]
[Pages 42764-42770]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21481]


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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. 154 / Tuesday, August 11, 1998 / 
Proposed Rules  

[[Page 42764]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV98-905-4 PR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Limiting the Volume of Small Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on limiting the volume of 
small red seedless grapefruit entering the fresh market under the 
marketing order covering oranges, grapefruit, tangerines, and tangelos 
grown in Florida. The marketing order is administered locally by the 
Citrus Administrative Committee (committee). This rule would limit the 
volume of size 48 and/or size 56 red seedless grapefruit handlers could 
ship during the first 11 weeks of the 1998-1999 season beginning in 
September. This rule would establish the base percentage for these 
small sizes at 25 percent for the 11 week period. This proposal would 
provide a sufficient supply of small sized red seedless grapefruit to 
meet market demand, without saturating all markets with these small 
sizes. This rule would help stabilize the market and improve grower 
returns.

DATES: Comments must be received by August 31, 1998.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposal. Comments must be sent 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. All comments should 
reference the docket number and the date and page number of this issue 
of the Federal Register and will be made available for public 
inspection in the Office of the Docket Clerk during regular business 
hours.

FOR FURTHER INFORMATION CONTACT: William G. Pimental, Southeast 
Marketing Field Office, F&V, AMS, USDA, P.O. Box 2276, Winter Haven, 
Florida 33883-2276; telephone: (941) 299-4770, Fax: (941) 299-5169; or 
George Kelhart, Technical Advisor, Marketing Order Administration 
Branch, F&V, AMS, USDA, room 2522-S, P.O. Box 96456, Washington, DC 
20090-6456; telephone: (202) 690-3919, 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 proposal 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 of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This proposal 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\15/16\ inches in 
diameter).
    Section 905.52 of the 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 
would be 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 regulations 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 sizes 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 regulation period is 11 weeks 
long and 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

[[Page 42765]]

volume of sizes 48 and/or 56 they may ship in a regulated week.
    This proposed rule would limit the volume of small red seedless 
grapefruit entering the fresh market for each week of the 11 week 
period beginning the week of September 21. This rule would limit the 
volume of sizes 48 and/or 56 red seedless grapefruit entering the fresh 
market for each of the 11 weeks at 25 percent. This would allow the 
committee to start the season at the most restrictive level allowed 
under Sec. 905.153, and if conditions warrant, to release greater 
quantities of size 48 and/or size 56 small red grapefruit as more 
information becomes available. This action was recommended by the 
committee at its meeting on May 22, 1998, by a vote of 14 in favor to 2 
opposed.
    For the seasons 1994-95, 1995-96, and 1996-97, returns on red 
seedless grapefruit had been declining, often not returning the cost of 
production. On tree prices for red seedless grapefruit had fallen 
steadily from $9.60 per carton (\3/5\ bushel) during the 1989-90 
season, to $3.45 per carton during the 1994-95 season, to a low of 
$1.41 per carton during the 1996-97 season.
    The committee determined that one problem contributing to the 
market's condition was the excessive number of small sized grapefruit 
shipped early in the marketing season. In the 1994-95, 1995-96, and 
1996-97 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 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 higher prices 
than smaller sizes. However, there is a push early in the season to get 
fruit into the market to take advantage of the high 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, driving 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 covered in this 
rule, the f.o.b. for large sizes dropped to within two dollars of the 
f.o.b. for small sizes.
    In the three seasons prior to 1997-98, prices of red seedless 
grapefruit fell from a weighted average f.o.b. of $7.80 per carton to 
an average f.o.b. of $5.50 per carton during the period covered by this 
rule. Even though later in the season the crop sized to naturally limit 
the amount of smaller sizes available for shipment, the price structure 
in the market had already been negatively affected. During the three 
seasons, the market did not recover, 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 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 
had fallen from a high near $7.00 in 1991-92 to around $1.50 for the 
1996-97 season. The study projected that if the industry elected to 
make no changes, the on tree price would remain around $1.50. The study 
also indicated that increasing minimum size restrictions could help 
raise returns.
    To address this issue, the committee voted to utilize the 
provisions of Sec. 905.153, and establish weekly percentage of size 
regulation during the first 11 weeks of the 1997-98 season. The initial 
recommendation from the committee was to set the weekly percentage at 
25 percent for each of the 11 weeks. As more information on the crop 
became available, and as the season progressed, the committee met 
several times and adjusted its recommendations for the weekly 
percentages. The committee considered information from past seasons, 
crop estimates, fruit size, and other information to make their 
recommendations. Actual weekly percentages established during the 11 
week period during the 1997-98 season were 50 percent for the first 
three weeks, and 35 percent for the other eight weeks.
    In making this recommendation, the committee reviewed its 
experiences from the past season, and those of prior seasons. The 
committee believes establishing weekly percentages last season was 
successful. The committee examined shipment data covering the 11 week 
regulatory period for the last season and the four prior seasons. The 
information contained the amounts and percentages of sizes 48 and 56 
shipped during each week and weekly f.o.b. figures. During the 11 week 
period, the regulation was successful at helping maintain prices at a 
higher level than the prior season, and sizes 48 and 56 by count and as 
a percentage of total shipments were reduced.
    In comparison with f.o.b. prices from the 1996-97 season, for weeks 
when pricing information was available (weeks 6 through 11), last 
season's numbers were higher in five of the six weeks. The average 
f.o.b. for these weeks was $6.28 for the 1996-97 season and $6.55 for 
the 1997-98 season. Last season, sizes 48 and 56 represented only 31 
percent of total shipments during the 11 week regulatory period as 
compared to 38 percent during the previous season. There was also a 15 
percent reduction in shipments of sizes 48 and 56 by count for the 11 
weeks.
    Other information also indicates the regulation was successful. In 
past seasons, the on tree price had been dropping steadily. However, on 
tree prices for the month following the 11 weeks of regulation indicate 
that in December 1997 the on tree price for grapefruit was $2.26 
compared to $1.55 for the previous season.
    The committee was concerned that the glut of smaller, lower priced 
fruit on the early market was driving down the price for all sizes. 
There was a steep decline in prices for larger sizes in previous 
seasons. During the six weeks for mid-October through November, prices 
for sizes 23, 27, 32, and 36 fell by 28, 27, 21, and 20 percent, 
respectively, during the 1996-97 season. Prices for the same sizes 
during the same period fell only 5, 5, 2, and 7 percent, respectively, 
last season with regulation. In fact, prices for all sizes were firmer 
during this period for last season when compared to the previous year, 
with the weighted average price dropping only 9 percent during this 
period as compared to 22 percent for the previous season.
    An economic study done by Florida Citrus Mutual (Lakeland, Florida) 
in April 1998, found that the weekly percentage regulation had been 
effective. The study stated that part of the strength in early season 
pricing appeared to be due to the use of the weekly percentage rule to 
limit the volume of sizes 48 and 56. It said that prices were generally 
higher across the size spectrum with sizes 48 and 56 having the largest 
gains, with larger sized grapefruit registering modest improvements. 
The rule shifted the size distribution toward the higher priced, larger 
sized grapefruit which helped raise weekly average f.o.b. prices. It 
further stated that sizes 48 and 56

[[Page 42766]]

grapefruit accounted for around 27 percent of domestic shipments during 
the same 11 weeks during the 1996-97 season. Comparatively, sizes 48 
and 56 accounted for only 17 percent of domestic shipments during the 
same period last season, as small sizes were used to supply export 
customers with preferences for small sized grapefruit.
    A subcommittee had been formed to examine how weekly percentage of 
size regulation could best be used. The subcommittee recommended to the 
full committee that the weekly percentage of size regulation should be 
set at 25 percent for the 11 week period. Members believe that the 
problems associated with an uncontrolled volume of small sizes entering 
the market early in the season will continue. The subcommittee thought 
that to provide the committee with the most flexibility, the weekly 
percentage should be set at 25 percent for each of the 11 weeks in the 
regulated period. The subcommittee believed it was best to set 
regulation at the most restrictive level, and then relax the percentage 
as warranted by conditions later in the season. The subcommittee also 
recommended that the committee meet on a regular basis early in the 
season to consider adjustments in the weekly percentage rates as was 
done in the previous season.
    The recommendations of the subcommittee were reviewed by the 
committee. In its discussion, the committee recognized the need for and 
the benefits of the weekly percentage regulation. The committee agreed 
with the findings of the subcommittee, and recommended establishing the 
base percentage at 25 percent for each of the regulation weeks. This is 
as restrictive as Sec. 905.153 will allow.
    In making this recommendation, the committee considered that by 
establishing regulation at 25 percent, they could meet again in August 
and the months following and use the best information available to help 
the industry and the committee make the most informed decisions as to 
whether the established percentage is appropriate.
    Based on this information and the experiences from last season, the 
committee agreed to establish the weekly percentage at the most 
restrictive level. They can then meet in late August, and in September 
and October as needed when additional information is available and 
determine whether the set percentage level is appropriate. They said 
this is essentially what was done the prior year, and it had been very 
successful. The committee had met in May 1997, and recommended a weekly 
percentage be established at 25 percent for each of the eleven weeks. 
In August, the committee met again, and recommended that the weekly 
percentage be relaxed. They met again in October, and recommended 
further relaxations. Any changes to the weekly percentage proposed by 
this rule would require additional rulemaking and the approval of the 
Secretary.
    The committee noted that more information helpful in determining 
the appropriate weekly percentages will be available after August. At 
the time of the May meeting, grapefruit had not yet begun to size, 
giving little indication as to the distribution of sizes. Only the most 
preliminary of crop estimates was available, with the official estimate 
not to be issued until October.
    While information concerning the coming season is limited prior to 
September, there are indications that setting the weekly percentage at 
25 percent is the appropriate level. During deliberations last season 
as to weekly percentages, the committee considered how past shipments 
had affected the market. Based on this statistical information, the 
committee members believed there was an indication that once shipments 
of sizes 48 and 56 reached levels above 250,000 cartons a week, prices 
declined on those and most other sizes of red seedless grapefruit. The 
committee believed that if shipments of small sizes could be maintained 
at around 250,000 cartons a week, prices should stabilize and demand 
for larger, more profitable sizes should increase.
    As is the case for this season, they wanted to recommend a weekly 
percentage that would provide a sufficient volume of small sizes 
without adversely impacting the markets for larger sizes. They also 
originally recommended that the percentage for each of the 11 weeks be 
established at the 25 percent level. This percentage, when combined 
with the average weekly shipments for the total industry, provided a 
total industry allotment of approximately 244,000 cartons of sizes 48 
and/or 56 red seedless grapefruit per regulated week. The total 
shipments of small red seedless grapefruit would approach the 250,000 
carton mark during regulated weeks without exceeding it.
    While the committee did eventually vote last season to increase the 
weekly percentages, shipments of sizes 48 and 56 during the 11 weeks 
regulated during the 1997-98 season remained close to the 250,000 
carton mark. In only 3 of the 11 weeks did the volume of sizes 48 and 
56 exceed 250,000 cartons, and even then, by not more than 35,000 
cartons. This may have contributed to the success of the regulation.
    Based on the shipments from last year, a weekly percentage of 25 
percent would not have been that much more restrictive on shipments 
than the percentages established, reducing in most cases just the 
excess available allotment. In setting the weekly percentage for each 
week at 25 percent this season, the total available allotment would 
closely approximate the 250,000 carton level.
    In addition, the production area suffered through a period of 
insufficient rainfall during the spring. While the actual effects are 
not currently known, it is possible that this may affect the sizing of 
the crop as well as maturity. This could mean a larger volume of small 
sized red seedless grapefruit, further exacerbating the problem with 
small sizes early in the season.
    The situation is also complicated by the ongoing economic problems 
affecting the Asian markets. In past seasons, the Asian markets have 
shown a strong demand for the smaller sized red seedless grapefruit. 
The reduction in shipments to that area experienced during the later 
season last year is expected to continue during the coming season. This 
reduction in demand could result in a greater amount of small sizes for 
the existing markets to absorb. These factors increase the need for 
restrictions to prevent the volume of small sizes from overwhelming all 
markets. Therefore, based on the information currently available, 
setting the weekly percentages at 25 percent may be the most 
appropriate level.
    Therefore, this rule would establish the weekly percentage at 25 
percent for each of the 11 weeks. The committee plans to meet in late 
August, and as needed during the remainder of the 11 week period to 
work to ensure that the set weekly percentages are at the appropriate 
levels.
    Under Sec. 905.153, the quantity of sizes 48 and/or 56 red seedless 
grapefruit that may be shipped by a handler during a regulated week 
would be calculated using the recommended percentage of 25 percent. By 
taking the 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 has been 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

[[Page 42767]]

in May during the previous five seasons are added and divided by five 
to establish an average season. This average season is then divided by 
the 33 weeks to derive the average week. This average week would be the 
base for each handler for each of the 11 weeks of the regulatory 
period. The weekly percentage, in this case 25 percent, is multiplied 
by a handler's average week. The product is that handler's allotment of 
sizes 48 and/or 56 red seedless grapefruit for the given week.
    Under this proposed rule, the calculated allotment is the amount of 
small sized red seedless grapefruit a handler could ship. If the 
minimum size established under Sec. 905.52 remains at size 56, handlers 
could 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 
could fill their allotment with size 48 fruit such that the total of 
these shipments are within the established limits. The committee staff 
would perform the specified calculations and provide them to each 
handler on or before August 15 each year.
    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 would then be divided by 33 weeks to 
yield an average week, in this case, 1,600 cartons. This would be 
Handler A's base. The weekly percentage of 25 percent would then be 
applied to this amount. This would provide this handler with a weekly 
allotment of 400 cartons (1,600 x .25) of size 48 and/or 56.
    The average week for handlers with less than five previous seasons 
of shipments would be 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 would have no prior 
period on which to base their average week. Therefore, under this 
proposal, a new handler could ship small sizes equal to 25 percent of 
their total volume of shipments during their first shipping week. Once 
a new handler has established shipments, their average week will be 
calculated as an average of the weeks they have shipped during the 
current season.
    This proposed rule would establish a weekly percentage of 25 
percent for each of the 11 weeks to be regulated. The regulatory period 
begins the third Monday in September. Each regulation week would begin 
Monday at 12:00 a.m. and end at 11:59 p.m. the following Sunday, since 
most handlers keep records based on Monday being the beginning of the 
work week. If necessary, the committee could meet and recommend a 
percentage above 25 percent to the Secretary at any time during the 
regulatory period.
    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 could handle an 
amount of sizes 48 and/or 56 red 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) would be 
deducted from the handler's allotment for the following week. 
Overshipments would not be allowed during week 11 because there would 
be 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 would not be carried forward to the following 
week. However, a handler to whom an allotment has been issued could 
lend or transfer all or part of such allotment (excluding the 
overshipment allowance) to another handler. In the event of a loan, 
each party would, 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 would promptly notify the committee 
so that proper adjustments of the records could be made. In each case, 
the committee would confirm in writing all such transactions prior to 
the following week. The committee could also act on behalf of handlers 
wanting to arrange allotment loans or participate in the transfer of 
allotment. Repayment of an allotment loan would be at the discretion of 
the handlers party to the loan.
    The committee would compute each handler's allotment by multiplying 
the handler's average week by the percentage established by regulation 
for that week. The committee would notify each handler prior to that 
particular week of the quantity of sizes 48 and 56 red seedless 
grapefruit such handler could handle during a particular week, making 
the necessary adjustments for overshipments and loan repayments.
    During committee deliberations, several concerns were raised 
regarding this proposed regulation. One area of concern was the way 
allotment base is calculated. Two members commented that the rule was 
not fair to those handlers that shipped the majority of their 
grapefruit shipments during the 11 week period. They said that using a 
33 week season as the basis for allotment was not reflective of their 
shipments during the regulated period, and that their allotment was not 
enough to cover their customer base.
    The committee chose to use the past five seasons to provide the 
most accurate picture of an average season. When recommending 
procedures for establishing weekly percentage of size regulation for 
red seedless grapefruit, the committee discussed several methods of 
measuring a handler's volume to determine this base. It was decided 
that shipments for the five previous years and for the 33 weeks 
beginning the third Monday in September to the first Sunday the 
following May should be used for calculation purposes.
    This bases allotment on a 33 week period of shipments, not just a 
handler's early shipments. This was done specifically to accommodate 
small shippers or light volume shippers, who may not have shipped much 
grapefruit in the early season. The use of an average week based on 33 
weeks also helps adjust for variations in growing conditions that may 
affect when fruit matures in different seasons and growing areas. After 
considering different ways to calculate the average week, the committee 
settled on this method as the definition of prior period that would 
provide each handler with an equitable base from which to establish 
shipments.
    In its discussion, the committee recognized that there were 
concerns regarding the way base is calculated. However, committee 
members also stated that this type of regulation is intended to be 
somewhat restrictive, and providing a system that satisfies everyone is 
difficult, if not impossible, to achieve. There was general agreement 
that this method was the best option considered thus far. Another 
member

[[Page 42768]]

commented that this option also provides a larger industry base than an 
11 week calculation, supplying a greater amount of available base 
overall.
    In regards to whether their allotment would be enough to cover 
their customer base, the procedures under which this rule is 
recommended provide flexibility through several different options. 
Handlers can transfer, borrow or loan allotment based on their needs in 
a given week. Handlers also have the option of over shipping their 
allotment by 10 percent in a week, as long as the overshipment is 
deducted from the following week's shipments. Statistics show that in 
none of the regulated weeks was the total available allotment used. The 
closest it came was 83 percent of available base used. However, this 
still left an available allotment for loan or transfer of over 57,000 
cartons. Approximately 190 loans and transfers were utilized last 
season. To facilitate this process, the committee staff provides a list 
of handler names and telephone numbers to help handlers find possible 
sources of allotment if needed for loan or trade. Also, this regulation 
only restricts shipments of small sized red grapefruit. There are no 
volume restrictions on larger sizes.
    Another concern expressed was that the rule only covers red 
seedless grapefruit. One member wanted the committee to consider adding 
white grapefruit to the regulation. The member also asked that the 
committee continue to consider other possibilities on which to base 
regulation. The committee agreed that the provisions by which this 
regulation is recommended should be reviewed on a continuous base. It 
was also stated that should the committee want to change Sec. 905.153, 
the section outlining the procedures for setting weekly percentage of 
size regulation, they could consider it as part of the current meeting. 
No motions for change were received.
    Another concern expressed was that the committee was considering 
meeting too often during the regulatory period to consider changing the 
weekly percentages. The member said that marketing plans are made 
further in advance than two to three weeks. The committee responded 
that information that is valuable in considering the appropriate 
percentage levels are not available until the regulatory period begins. 
Members agreed that it was important to meet and adjust percentages as 
necessary as seasonal information becomes available.
    After considering the concerns expressed, and the available 
information, the committee determined that this rule is needed to 
regulate shipments of small sized red seedless grapefruit.
    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), AMS has considered the economic impact of this action 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 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 grapefruit 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) 
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 (13 CFR 121.601).
    Based on the industry and committee data for the 1997-98 season, 
the average annual f.o.b. price for fresh Florida red grapefruit during 
the 1997-98 season was around $6.30 per \4/5\ bushel cartons, and total 
fresh shipments for the 1997-98 season are estimated at 15.5 million 
cartons of red 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.
    Under the authority of Sec. 905.52 of the order, this proposed rule 
would limit the volume of small red seedless grapefruit entering the 
fresh market during the 11 weeks beginning the third Monday in 
September for the 1998-99 season. This rule utilizes the provisions of 
Sec. 905.153. The proposal would limit the volume of sizes 48 and/or 56 
red seedless grapefruit by setting the weekly percentage for each of 
the 11 weeks at 25 percent. 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 would calculate a handler's weekly allotment of 
small sizes. The rule would set the weekly percentage at 25 percent for 
the 11 week period. This proposal would provide a supply of small sized 
red seedless grapefruit sufficient to meet market demand, without 
saturating all markets with these small sizes. This rule would help 
stabilize the market and improve grower returns during the early part 
of the season.
    The weekly percentage of 25 percent, when combined with the average 
weekly shipments for the total industry, would provide a total industry 
allotment of nearly 250,000 cartons of sizes 48 and/or 56 red seedless 
grapefruit per regulated week. Based on shipments from seasons 1993-97, 
a total available weekly allotment of 250,000 cartons would exceed 
actual shipments for each of the first three weeks that would be 
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 the 1996-97 season, an average of 4.2 percent of 
overall shipments during that period would have been affected. A large 
percentage of this volume most likely could have been replaced by 
larger sizes. Under this

[[Page 42769]]

proposal a sufficient volume of small sized red grapefruit would still 
be allowed into all channels of trade, and allowances would be 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 early season crop tends to have a greater percentage of small 
sizes. This creates a glut of smaller, lower priced fruit, driving 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 covered in this rule, the f.o.b. for large sizes has 
dropped to within two dollars of the f.o.b. for small sizes.
    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 had fallen from a high near $7.00 in 
1991-92 to around $1.50 for the 1996-97 season. The study projected 
that if the industry elected to make no changes, the on tree price 
would remain around $1.50. The study also indicated that increasing 
minimum size restrictions could help raise returns.
    This regulation would have a positive impact on affected entities. 
The purpose of this rule would be to help stabilize the market and 
improve grower returns by limiting the volume of small sizes marketed 
early in the season. There are no volume restrictions on larger sizes. 
Therefore, larger sizes could be substituted for smaller sizes with a 
minimum effect on overall shipments. While this rule may necessitate 
spot picking, which may entail slightly higher harvesting costs, many 
in the industry are already using the practice, and because this 
regulation is only in effect for part of the season, the overall effect 
on costs is minimal. This rule is not expected to appreciably increase 
costs to producers.
    This rule would help limit the effects of an over supply of small 
sizes early in the season. A similar rule was enacted successfully last 
season. During the 11 week period, the regulation was successful at 
helping maintain prices at a higher level than the prior season, and 
sizes 48 and 56 by count and as a percentage of total shipments were 
reduced. Therefore, this action should have a positive impact on grower 
returns.
    For the weeks when pricing information was available, last season's 
prices were higher in five of the six weeks when compared with f.o.b. 
prices from the 1996-97 season. The average f.o.b. for these weeks was 
$6.28 for the 1996-97 season and $6.55 for the 1997-98 season. It also 
reduced sizes 48 and 56 as a percentage of the crop. Last season sizes 
48 and 56 represented 31 percent of shipments during the 11 week 
regulatory period, compared to 38 percent during the previous season. 
There was also a 15 percent reduction in shipments of sizes 48 and 56 
by count. Numbers from the month following the 11 weeks of regulation 
also indicate that in December 1997 the on tree price for grapefruit 
was $2.26 compared to $1.55 for the previous season.
    The rule was also successful in reducing the steep drop in prices 
for larger sizes that had occurred in previous seasons. During the six 
weeks from mid-October through November, prices for sizes 23, 27, 32, 
and 36 fell by 28, 27, 21, and 20 percent, respectively, during the 
1996-97 season. Prices for the same sizes during the same period last 
season only fell by 5, 5, 2, and 7 percent, respectively, under 
regulation. Prices for all sizes were firmer during this period last 
season when compared to the previous year, with the weighted average 
price dropping only 9 percent during this period last season as 
compared to 22 percent for the previous season.
    An economic study done by Florida Citrus Mutual (Lakeland, Florida) 
in April 1998, found that the weekly percentage regulation had been 
effective. The study indicated that part of the strength in early 
season pricing appeared to be due to the use of the weekly percentage 
rule to limit the volume of sizes 48 and 56. Prices were generally 
higher across the size spectrum with sizes 48 and 56 having the largest 
gains, with larger sized grapefruit registering modest improvements. It 
also stated that sizes 48 and 56 grapefruit accounted for around 27 
percent of domestic shipments during the 11 weeks during the 1996-97 
season, compared to only 17 percent during the same period last season, 
as small sizes were used to supply export customers with preferences 
for small sized grapefruit.
    Even with restrictions in place, total shipments during the 11 week 
period last season were higher than the previous season. There was also 
no noticeable drop in exports. Therefore, shipments remained strong and 
prices were stabilized during the regulated period.
    Over 50 percent of red seedless grapefruit is shipped to the fresh 
market. Because of reduced demand and an oversupply, the processing 
outlet is not currently profitable. Consequently, it is essential that 
the market for fresh red grapefruit be fostered and maintained. Any 
costs associated with this action would only be for the 11 week 
regulatory period. However, benefits from this action could stretch 
throughout the entire 33 week season.
    This rule is intended to stabilize the market during the early 
season and increase grower returns. Information available from last 
season suggests the regulation could do both. A stabilized price that 
returns a fair market value would be beneficial to both small and large 
growers and handlers. The opportunities and benefits of this rule are 
expected to be available to all red seedless grapefruit handlers and 
growers regardless of their size of operation.
    One alternative to the actions approved was considered by the 
committee prior to making the recommendations. The alternative 
discussed was whether to amend Sec. 905.153 in conjunction with setting 
a weekly percentage. Two members suggested that the calculation used to 
determine a handler's allotment base should be changed from 33 weeks to 
a calculation that used the 11 weeks regulated by the rule. In its 
discussion, the committee recognized that there were concerns regarding 
the way base is calculated. However, committee members also stated that 
this type of regulation is intended to be somewhat restrictive, and 
providing a system that satisfies everyone is difficult, if not 
impossible, to achieve. There was general agreement that though this 
method had its concerns, it was the best option considered thus far. 
Therefore, the committee rejected this alternative, concluding the 
recommendations previously discussed were appropriate for the industry.
    Handlers utilizing the flexibility of the loan and transfer aspects 
of this action would be required to submit a form to the committee. The 
rule would increase the reporting burden on approximately 80 handlers 
of red seedless grapefruit who would 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

[[Page 42770]]

(Pub. L. 104-13) 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 sectors.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this proposed 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).
    The committee's meeting was 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 22, 1998, meeting was a public meeting and 
all entities, both large and small, were able to express views on this 
issue. Interested persons are invited to submit information on the 
regulatory and informational impacts of this action on small 
businesses.
    A 20-day comment period is provided to allow interested persons to 
respond to this proposal. Twenty days is deemed appropriate because 
this rule would need to be in place as soon as possible since handlers 
will begin shipping grapefruit in September. In addition, because of 
the nature of this rule, handlers need time to consider their allotment 
and how best to service their customers. Also, the industry has been 
discussing this issue for some time, and the committee has kept the 
industry well informed. It has also been widely discussed at various 
industry and association meetings. Interested persons have had time to 
determine and express their positions. All written comments timely 
received will be considered before a final determination is made on 
this matter.

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 
proposed to be amended as follows:

PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN 
FLORIDA

    1. The authority citation for 7 CFR Part 905 continues to read as 
follows:

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

    2. A new Sec. 905.350 is added to read as follows:


Sec. 905.350  Red seedless grapefruit regulation.

    This section establishes the weekly percentages to be used to 
calculate each handler's weekly allotment of small sizes. If the 
minimum size in effect under Sec. 905.306 for red seedless grapefruit 
is 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 weekly limits. If the minimum size in effect 
under Sec. 905.306 for red seedless grapefruit is 48, handlers can fill 
their allotment with size 48 red seedless grapefruit such that the 
total of these shipments are within the established weekly limits. The 
weekly percentages for sizes 48 and/or 56 red seedless grapefruit grown 
in Florida, which may be handled during the specified weeks are as 
follows:

------------------------------------------------------------------------
                                                                Weekly  
                            Week                              percentage
------------------------------------------------------------------------
(a) 9/21/98 through 9/27/98................................           25
(b) 9/28/98 through 10/4/98................................           25
(c) 10/5/98 through 10/11/98...............................           25
(d) 10/12/98 through 10/18/98..............................           25
(e) 10/19/98 through 10/25/98..............................           25
(f) 10/26/98 through 11/1/98...............................           25
(g) 11/2/98 through 11/8/98................................           25
(h) 11/9/98 through 11/15/98...............................           25
(i) 11/16/98 through 11/22/98..............................           25
(j) 11/23/98 through 11/29/98..............................           25
(k) 11/30/98 through 12/6/98...............................           25
------------------------------------------------------------------------

    Dated: August 5, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-21481 Filed 8-10-98; 8:45 am]
BILLING CODE 3410-02-P