[Federal Register Volume 63, Number 154 (Tuesday, August 11, 1998)]
[Rules and Regulations]
[Pages 42688-42691]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21578]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV98-989-2 FIR]


Raisins Produced From Grapes Grown In California; Increase in 
Desirable Carryout Used to Compute Trade Demand

AGENCY: Agricultural Marketing Service, USDA.


[[Page 42689]]


ACTION: Final rule.

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SUMMARY: The Department of Agriculture (Department) is adopting, as a 
final rule, without change, the provisions of an interim final rule 
that increased the desirable carryout used to compute the yearly trade 
demand for raisins covered under the Federal marketing order for 
California raisins. The order regulates the handling of raisins 
produced from grapes grown in California and is administered locally by 
the Raisin Administrative Committee (Committee). Trade demand is 
computed based on a formula specified in the order, and is used to 
determine volume regulation percentages for each crop year, if 
necessary. Desirable carryout, one factor in this formula, is the 
amount of tonnage from the prior crop year needed during the first part 
of the next crop year to meet market needs, before new crop raisins are 
available for shipment. This rule continues to increase the desirable 
carryout from 2 to 2\1/2\ months of prior year's shipments. This 
increase allows for a higher free tonnage percentage which makes more 
raisins available to handlers for immediate use early in the season.

EFFECTIVE DATE: September 10, 1998.

FOR FURTHER INFORMATION CONTACT: Maureen T. Pello, Marketing 
Specialist, California Marketing Field Office, Fruit and Vegetable 
Programs, AMS, USDA, 2202 Monterey Street, suite 102B, Fresno, 
California 93721; telephone: (209) 487-5901, Fax: (209) 487-5906; or 
George Kelhart, Technical Advisor, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, room 2525-S, P.O. Box 
96456, Washington, DC 20090-6456; telephone: (202) 720-2491, or 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, DC 20090-6456; telephone: (202) 
720-2491; Fax: (202) 205-6632.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing 
Agreement and Order No. 989 (7 CFR part 989), both as amended, 
regulating the handling of raisins produced from grapes grown in 
California, hereinafter referred to as the ``order.'' The order is 
effective under the Agricultural Marketing Agreement Act of 1937, as 
amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''
    The Department is issuing this rule in conformance with Executive 
Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing, the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which the handler is an inhabitant, or has his or her 
principal place of business, has jurisdiction in equity to review the 
Secretary's ruling on the petition, provided an action is filed not 
later than 20 days after the date of the entry of the ruling.
    This rule continues to increase the desirable carryout used to 
compute the yearly trade demand for raisins regulated under the order. 
Trade demand is computed based on a formula specified in the order, and 
is used to determine volume regulation percentages for each crop year, 
if necessary. This rule continues to increase the desirable carryout, 
one factor in this formula, from 2 to 2\1/2\ months of prior year's 
shipments. This increase allows for a higher free tonnage percentage 
which makes more raisins available to handlers for immediate use early 
in the season. This rule was unanimously recommended by the Committee 
at a meeting on June 11, 1998.
    The order provides authority for volume regulation designed to 
promote orderly marketing conditions, stabilize prices and supplies, 
and improve producer returns. When volume regulation is in effect, a 
certain percentage of the California raisin crop may be sold by 
handlers to any market (free tonnage) while the remaining percentage 
must be held by handlers in a reserve pool (or reserve) for the account 
of the Committee. Reserve raisins are disposed of through certain 
programs authorized under the order. For instance, reserve raisins may 
be sold by the Committee to handlers for free use or to replace part of 
the free tonnage raisins they exported; used in diversion programs; 
carried over as a hedge against a short crop the following year; or 
disposed of in other outlets not competitive with those for free 
tonnage raisins, such as government purchase, distilleries, or animal 
feed. Net proceeds from sales of reserve raisins are distributed to the 
reserve pool's equity holders, primarily producers.
    Section 989.54 of the order prescribes procedures to be followed in 
establishing volume regulation and includes methodology used to 
calculate percentages. Trade demand is based on a computed formula 
specified in this section, and is used to determine volume regulation 
percentages. Trade demand is equal to 90 percent of the prior year's 
shipments, adjusted by the carryin and desirable carryout inventories.
    At one time, Sec. 989.54(a) also specified actual tonnages for 
desirable carryout for each varietal type regulated. However, in 1989, 
these tonnages were suspended from the order, and flexibility was added 
so that the Committee could adopt a formula for desirable carryout in 
the order's rules and regulations. The formula has allowed the 
Committee to periodically adjust the desirable carryout to better 
reflect changes in each season's marketing conditions.
    The formula for desirable carryout has been specified since 1989 in 
Sec. 989.154. Initially, the formula was established so that desirable 
carryout was based on shipments for the first 3 months of the prior 
crop year--August, September, and October (the crop year runs from 
August 1 through July 31). This amount was gradually reduced to 2\1/2\ 
months in 1991-92, 2\1/4\ months in 1995-96, and to a level of 2 months 
in 1996-97. The Committee reduced the desirable carryout because it 
believed that an excessive supply of raisins was available early in a 
new crop year creating unstable market conditions.
    At its June 11, 1998, meeting, the Committee evaluated the 2-month 
desirable carryout level and recommended adjusting the formula back up 
to 2\1/2\ months of prior year's shipments (August, September, and one-
half of October). In its deliberations, the Committee considered the 
impact of the reduction in desirable carryout over the past few years 
along with a change to one of its export programs operated under the 
order. Prior to 1995, the Committee administered an industry export 
program whereby handlers who exported California raisins could 
purchase, at a reduced rate, reserve raisins for free use. This 
effectively blended down the cost of the raisins which were exported, 
allowing handlers to be price competitive in export

[[Page 42690]]

markets (prices in export markets are generally lower than the domestic 
market). One problem that the industry found with this ``raisin-back'' 
program was that the reserve raisins which handlers received went back 
into free tonnage outlets creating an excessive supply of raisins. To 
correct this problem, the industry gradually switched to a program 
which offered cash, rather than reserve raisins, to exporting handlers. 
The desirable carryout was reduced to 2 months in 1996-97 to help 
decrease the supply of raisins available early in a season and, thus, 
stabilize market conditions.
    The Committee now believes that not enough raisins are being made 
available for growth. Increasing the desirable carryout allows for a 
higher trade demand figure and, thus, a higher free tonnage percentage 
which makes more raisins available to handlers for immediate use early 
in the season. A higher free tonnage percentage may also improve early 
season returns to producers (producers are paid an established field 
price for their free tonnage).
    At the meeting, the Committee also compared the average desirable 
carryout for the past 7 years with the average, actual tonnage that all 
handlers have in inventory at the end of a crop year. Desirable 
carryout has averaged 66,033 tons at 2\1/2\ months, 63,424 tons at 2\1/
4\ months, and 63,364 tons at 2 months. For the past 7 years, an 
average of 101,459 tons has been held in inventory by all handlers at 
the end of a crop year. Increasing the desirable carryout to 2\1/2\ 
months allows this factor to move towards what handlers are actually 
holding in inventory at the end of a crop year.
    Much of the discussion at the Committee's meeting concerned the 
desirable carryout of Natural (sun-dried) Seedless raisins (Naturals). 
Naturals are the major commercial varietal type of raisin produced in 
California. Volume regulation has been implemented for Naturals for the 
past several seasons. However, the Committee also believes that the 
increase in desirable carryout to 2\1/2\ months should apply to the 
other varietal types of raisins covered under the order.
    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 20 handlers of California raisins who are 
subject to regulation under the order and approximately 4,500 raisin 
producers in the regulated area. Small agricultural service firms 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. No more than 7 handlers, and a majority of 
producers, of California raisins may be classified as small entities. 
Thirteen of the 20 handlers subject to regulation have annual sales 
estimated to be at least $5,000,000, and the remaining 7 handlers have 
sales less than $5,000,000, excluding receipts from any other sources.
    This rule continues to increase the desirable carryout used to 
compute the yearly trade demand for raisins regulated under the order. 
Trade demand is computed based on a formula specified under 
Sec. 989.54(a) of the order, and is used to determine volume regulation 
percentages for each crop year, if necessary. Desirable carryout, one 
factor in this formula, is the amount of tonnage from the prior crop 
year needed during the first part of the succeeding crop year to meet 
market needs, before new crop raisins are available for shipment. This 
rule continues to increase the desirable carryout specified in 
Sec. 989.154 from 2 to 2\1/2\ months of prior year's shipments.
    The 2\1/2\ month desirable carryout level applies uniformly to all 
handlers in the industry, whether small or large, and there are no 
known additional costs incurred by small handlers. As previously 
mentioned, increasing the desirable carryout increases trade demand and 
the free tonnage percentage which makes more raisins available to 
handlers early in the season. A higher free tonnage percentage may also 
improve early season returns to producers (producers are paid an 
established field price for their free tonnage).
    The Committee considered a number of alternatives to the one-half 
month increase in the desirable carryout level. The Committee has an 
appointed subcommittee which periodically holds public meetings to 
discuss changes to the order and other issues. The subcommittee met on 
April 21 and June 9, 1998, and discussed desirable carryout. The 
subcommittee considered establishing a set tonnage for desirable 
carryout (i.e., 75,000 tons for Naturals). However, this alternative 
would not allow the desirable carryout to fluctuate with changing 
market conditions from year to year. The subcommittee considered 
lowering the desirable carryout for Naturals by 15,000 tons to tighten 
the supply of raisins early in the season even more. However, the 
majority of subcommittee members believed that the early season supply 
of raisins needed to be increased rather than decreased.
    Another alternative raised at the Committee meeting was to make 
more raisins available to handlers at the end of a crop year through 
the industry's ``10 plus 10'' offers. The ``10 plus 10'' offers are two 
offers of reserve pool raisins which are made available to handlers 
during each season. Handlers may sell their ``10 plus 10'' raisins as 
free tonnage to any market. For each such offer, a quantity of reserve 
raisins equal to 10 percent of the prior year's shipments is made 
available for free use. The Committee considered offering for sale to 
handlers as free use an additional quantity of reserve raisins equal to 
5 percent of the prior year's shipments. Such an additional offer could 
generate revenue that could be used to sustain the Committee's ``cash-
back'' export program. As previously explained, under this program, 
handlers who export raisins to certain markets may receive cash from 
the reserve pool. This effectively blends down the cost of the raisins 
which were exported, allowing handlers to be price competitive in 
export markets (prices in export markets are generally lower than the 
domestic market). However, there is currently no provision in the order 
for this additional 5 percent offer.
    Another alternative that was raised at the Committee's meeting was 
to include a policy statement concerning reserve pool equity along with 
the recommendation to increase the desirable carryout. Some industry 
members are concerned that increasing desirable carryout, thereby 
increasing the free tonnage percentage, may reduce handler purchases of 
``10 plus 10'' raisins and, thus, impact pool revenue. As previously 
mentioned, net proceeds from sales of reserve raisins are distributed 
to reserve pool equity holders, primarily small producers. After much 
discussion, the majority of Committee members agreed that reserve pool 
equity was a separate issue from desirable carryout and would be 
addressed by the Committee's Audit Subcommittee.

[[Page 42691]]

    This rule imposes no additional reporting or recordkeeping 
requirements on either small or large raisin handlers. As with all 
Federal marketing order programs, reports and forms are periodically 
reviewed to reduce information requirements and duplication by industry 
and public sector agencies. Finally, the Department has not identified 
any relevant Federal rules that duplicate, overlap or conflict with 
this rule.
    In addition, the Committee's subcommittee meetings on April 21 and 
June 9, 1998, and the Committee meeting on June 11, 1998, where this 
action was deliberated were public meetings widely publicized 
throughout the raisin industry. All interested persons were invited to 
attend the meetings and participate in the industry's deliberations.
    An interim final rule concerning this action was published in the 
Federal Register on July 24, 1998 (63 FR 39699). Copies of the rule 
were mailed by the Committee staff to all Committee members and 
alternates, the Raisin Bargaining Association, handlers, and 
dehydrators. In addition, the rule was made available through the 
Internet by the Office of the Federal Register. That rule provided for 
a 10-day comment period which ended August 3, 1998. No comments were 
received.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
finalizing the interim final rule, without change, as published in the 
Federal Register (63 FR 39699, July 24, 1998), will tend to effectuate 
the declared policy of the Act.

List of Subjects in 7 CFR Part 989

    Grapes, Marketing agreements, Raisins, Reporting and recordkeeping 
requirements.

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    Accordingly, the interim final rule amending 7 CFR part 989 which 
was published at 63 FR 39699 on July 24, 1998, is adopted as a final 
rule without change.

    Dated: August 7, 1998.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 98-21578 Filed 8-7-98; 10:31 am]
BILLING CODE 3410-02-P