[Federal Register Volume 64, Number 153 (Tuesday, August 10, 1999)]
[Proposed Rules]
[Pages 43298-43301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20499]


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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. 64, No. 153 / Tuesday, August 10, 1999 / 
Proposed Rules  

[[Page 43298]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 981

[Docket No. FV99-981-3 PR]


Almonds Grown in California; Salable and Reserve Percentages for 
the 1999-2000 Crop Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule invites comments on establishing salable and reserve 
percentages for California almonds received by handlers during the 
1999-2000 crop year. The almond marketing order (order) regulates the 
handling of almonds grown in California and is administered locally by 
the Almond Board of California (Board). The percentages would be 77.64 
percent salable and 22.36 percent reserve. Salable almonds may be sold 
by handlers to any market at any time. Reserve almonds must be withheld 
by handlers or disposed of in authorized outlets. The 1999-2000 crop is 
estimated to be the largest crop on record. Volume regulation is 
intended to promote orderly marketing conditions and avoid unreasonable 
fluctuations in supplies and prices.

DATES: Comments must be received by September 9, 1999.

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) 720-5698; or E-mail: 
[email protected]. 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: Martin Engeler, Assistant Regional 
Manager, California Marketing Field Office, Marketing Order 
Administration Branch, F&V, AMS, USDA, 2202 Monterey Street, suite 
102B, Fresno, California 93721; telephone: (559) 487-5901, Fax: (559) 
487-5906; or George Kelhart, Technical Advisor, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, room 
2525-S, P.O. Box 96456, Washington, DC 20090-6456; telephone: (202) 
720-2491, Fax: (202) 720-5698. Small businesses may request information 
on complying with this regulation, or obtain a guide on complying with 
fruit, vegetable, and specialty crop marketing agreements and orders 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) 720-
5698, or E-mail: Jay.G[email protected]. You may view the marketing 
agreement and order small business compliance guide at the following 
web site: http://www.ams.usda.gov/fv/moab.html.

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Order No. 981, as amended (7 CFR part 981), regulating the handling of 
almonds grown in California, hereinafter referred to as the ``order.'' 
The marketing 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 of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the marketing order now in effect, salable and 
reserve percentages may be established for almonds handled by handlers 
during the crop year. This rule would establish salable and reserve 
percentages for almonds received by handlers during the 1999-2000 crop 
year which runs from August 1, 1999, through July 31, 2000. This rule 
will not preempt any State or local laws, regulations, or policies, 
unless they present an irreconcilable conflict with this rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with the Secretary a 
petition stating that the order, any provision of the order, or any 
obligation imposed in connection with the order is not in accordance 
with law and request a modification of the order or to be exempted 
therefrom. A handler is afforded the opportunity for a hearing on the 
petition. After the hearing the Secretary would rule on the petition. 
The Act provides that the district court of the United States in any 
district in which the handler is an inhabitant, or has his or her 
principal place of business, has jurisdiction to review the Secretary's 
ruling on the petition, provided an action is filed not later than 20 
days after the date of the entry of the ruling.
    This proposal invites comments on establishing salable and reserve 
percentages for California almonds received by handlers during the 
1999-2000 crop year. The percentages would be 77.64 percent salable and 
22.36 percent reserve. Salable almonds may be sold by handlers to any 
market at any time. Reserve almonds must be withheld by handlers or 
disposed of in authorized outlets. The 1999-2000 crop is estimated to 
be the largest crop on record. Volume regulation is intended to promote 
orderly marketing conditions and avoid unreasonable fluctuations in 
supplies and prices. This action was recommended by the Board at a 
meeting on July 12, 1999, by a vote of seven in favor and three 
opposed. Volume regulation was last implemented for California almonds 
during the 1994-95 crop year.
    Section 981.47 of the order provides authority for the Secretary, 
based on recommendations by the Board and analysis of other available 
information, to establish salable and reserve percentages for almonds 
received by handlers during a crop year. The crop year runs from August 
1 through July 31. To aid the Secretary in fixing the salable and 
reserve percentages, Sec. 981.49 of the order requires the Board to 
submit information to the Department on estimates of the marketable 
production of almonds, combined domestic and export trade demand needs 
for the year, carryin inventory at the beginning of the year, and the 
desirable carryout inventory at the end of the crop year. Section 
981.66 authorizes the disposition of reserve

[[Page 43299]]

almonds to certain outlets such as almond oil, almond butter, and 
animal feed.
    The Board met on May 12, 1999, to review the projected crop 
estimate and marketing conditions for the 1999-2000 season. The day 
before the Board's meeting, the California Agricultural Statistics 
Service (CASS) issued its initial forecast for the 1999 almond crop at 
760 million kernelweight pounds. Based on that estimate, the Board 
recommended salable and reserve percentages of 84.79 percent and 15.21 
percent, respectively. The CASS revised its crop estimate upwards to 
830 million pounds on July 8, 1999. Based on the updated crop estimate, 
the Board met on July 12 and revised its recommendation for salable and 
reserve percentages to 77.64 and 22.36 percent, respectively, again by 
a seven to three vote. The 830 million pound crop estimate represents a 
60 percent increase over 1998-99 production, and is 10 percent larger 
than the previous record crop of 756 million pounds produced in 1997-
98. According to the CASS, although freezing temperatures in early 
April caused locally variable production losses, average yields are 
expected to be high due to excellent bloom and good weather during the 
pollination period. If realized, this will be the largest almond crop 
on record to date.
    A tabulation of the estimates and calculations used by the Board as 
it considered recommending volume regulation for the 1999-2000 almond 
crop follows:

                  Marketing Policy Estimates--1999 CROP
                          [Kernelweight basis]
------------------------------------------------------------------------
                                                  Million
                                                   Pounds      Percent
------------------------------------------------------------------------
Estimated production:
    1. 1999 Production........................        830.0  ...........
    2. Loss and Exempt--4.0% (Resulting from           33.2
     the removal of inedible kernels by
     handlers and losses during manufacturing)
    3. Marketable Production..................        796.8  ...........
Estimated Trade Demand:
    4. Domestic...............................        190.0  ...........
    5. Export.................................        459.0
    6. Total..................................        649.0  ...........
Inventory Adjustment:
    7. Carryin 8/1/99.........................        100.4  ...........
    8. Desirable Carryover 7/31/00 (available          70.0
     for early season shipments during 2000-
     2001)....................................
    9. Adjustment (No. 8 minus no. 7).........        -30.4  ...........
Salable/Reserve:
    10. Adjusted Trade Demand (Item 6 plus            618.6  ...........
     item 9) (quantity of almonds from the
     marketable production necessary to meet
     trade demand needs)......................
    11. Reserve (No. 3 minus no. 10)..........        178.2  ...........
    12. Salable % (Item 10 divided by item 3    ...........        77.64
     x  100)..................................
    13. Reserve % (100% minus item 12)........  ...........        22.36
------------------------------------------------------------------------

    As specified in the marketing order, the Board considered the 
factors set forth in the preceding table in its deliberations. The 
available data indicates a supply for the 1999-2000 crop year of 827.2 
million kernelweight pounds (marketable production adjusted for carryin 
and desired carryout), which will exceed estimated trade demand by 
178.2 million kernelweight pounds. The estimated trade demand of 649 
million kernelweight pounds represents 110 percent of the estimated 
shipments for the current crop year, and exceeds the record high 
shipments of 1997-98 by 36 million kernelweight pounds, or 6 percent.
    In addition to the factors included in the table, the Board 
considered additional information such as the weather-related variation 
in production from year to year, significant increases in recent almond 
plantings, and increased yields. These are the primary factors 
contributing to the projected oversupply situation. The Board also 
considered recent price fluctuations in its deliberations. In 1997, 
grower prices averaged $1.55 per pound; during the 1998-99 season, 
prices have reportedly dropped significantly. This has been attributed 
to larger than anticipated 1998 supplies, speculation within the 
marketplace, and the anticipated large 1999-2000 crop.
    The proposed salable percentage of 77.64 percent would make 618.6 
million kernelweight pounds of the marketable production available to 
handlers for sale to any market. Combining this figure with the carryin 
inventory from the 1998-99 crop year (100.4 million kernelweight 
pounds) and deducting the desired carryout inventory at the end of the 
1999-2000 crop year (70.0 million kernelweight pounds) would result in 
a supply of 649 million kernelweight pounds. This supply would allow 
the industry to meet its trade demand needs of 649 million kernelweight 
pounds and allow for market growth. The remaining 22.36 percent, or 
178.2 million kernelweight pounds, of the marketable production would 
be withheld by handlers to meet their reserve obligation.
    All or part of the reserve almonds could be released to the salable 
category if it is found that the supply made available by the salable 
percentage is insufficient to satisfy 1999-2000 trade demand needs or 
desirable carryover for use during the 2000-2001 crop year. The Board 
is required to make any recommendations to the Secretary to increase 
the salable percentage prior to May 15, 2000, pursuant to Sec. 989.48 
of the order. Alternatively, all or a portion of the reserve almonds 
could be sold by the Board, or by handlers under agreement with the 
Board, to governmental agencies or charitable institutions or for 
diversion into almond oil, almond butter, animal feed, or other outlets 
which the Board finds are noncompetitive with existing normal outlets 
for almonds.
    As previously stated, 3 of the 10 Board members opposed the 
recommendation for volume regulation at both meetings where the 
percentages were recommended, with those in opposition commenting that 
this year's projected ``large'' crop would ultimately

[[Page 43300]]

be considered average in size, and that next year's crop would be even 
larger due to new plantings, or expressing a preference for seeing the 
industry concentrating on building demand rather than imposing a 
reserve. Observers at the Board meetings who were opposed to volume 
regulation commented that the industry should deal with increasing 
supplies by building demand through its promotional activities, rather 
than implementing reserves. Others suggested that it is more 
appropriate to manage market risks at the individual handler level 
through marketing tools such as forward contracting, rather than 
controlling supplies at the industry level.
    After much discussion, the majority of Board members supported the 
establishment of a reserve to help maintain orderly marketing 
conditions so that the industry can successfully manage the projected 
large 1999 almond crop. The long term goal of the almond industry is to 
increase almond consumption and demand, and the supporting Board 
members believe this can be best achieved in the presence of stable and 
orderly marketing conditions. These members believe that use of the 
reserve provisions of the order as a supply management tool, in 
conjunction with other marketing tools available in the order, can 
assist in accomplishing the industry's goals.
    The ``Guidelines for Fruit, Vegetable, and Specialty Crop Marketing 
Orders'' (Guidelines) issued by the Department in 1982 specify that 110 
percent of recent years' sales be made available to primary markets 
each season for marketing orders using volume regulation. This rule 
would provide an estimated 719 million kernelweight pounds of 
California almonds for unrestricted sales (1999 crop salable production 
plus carryin from the 1998 crop) to meet increasing domestic and world 
almond consumption demand. This amount exceeds the estimated delivered 
sales for 1998-99 California almonds by about 22 percent. Thus, the 
Guidelines' goals are met.
    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 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 105 handlers of California almonds who are 
subject to regulation under the order and approximately 6,000 almond 
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.
    Based on the most current data available, about 54 percent of the 
handlers ship under $5,000,000 worth of almonds and 46 percent ship 
over $5,000,000 worth on an annual basis. In addition, based on 
acreage, production, and grower prices reported by the National 
Agricultural Statistics Service (NASS), and the total number of almond 
growers, the average annual grower revenue is approximately $195,000. 
In view of the foregoing, it can be concluded that the majority of 
handlers and producers of California almonds may be classified as small 
entities.
    Pursuant to Sec. 981.47 of the order, this rule would establish 
salable and reserve percentages applicable to California almonds 
received by handlers during the 1999-2000 crop year. The volume 
regulation percentages would be 77.64 percent salable and 22.36 percent 
reserve. Salable almonds may be sold by handlers to any market at any 
time. Reserve almonds must be withheld by handlers or disposed of in 
authorized outlets such as almond oil, almond butter, and animal feed. 
Volume regulation is warranted this season because the marketable 
production estimate of 796.8 million kernelweight pounds combined with 
the 1998-99 carryin inventory of 100.4 million kernelweight pounds 
results in an available supply of about 897 million kernelweight 
pounds. After subtracting the desirable carryout of 70 million 
kernelweight pounds, the remaining supply of 827 million kernelweight 
pounds would be 178 million kernelweight pounds higher than the trade 
demand of 649 million kernelweight pounds. Volume regulation is 
intended to promote orderly marketing conditions and avoid unreasonable 
fluctuations in supplies and prices, and should ultimately improve 
grower returns.
    Regarding the impact of this rule on affected entities, the salable 
and reserve percentages would apply uniformly to all handlers in the 
industry, regardless of size. There were some concerns expressed at the 
Board's meeting regarding the impact of a reserve on small handlers, 
specifically, that small handlers who do not have adequate storage 
facilities may have to rent such facilities to hold their reserve 
almonds. These are costs they would not otherwise incur. However, the 
costs of holding almonds in reserve would be borne proportionately 
throughout the industry. All handlers would be required to store 
reserve almonds in varying quantities, depending upon the total amount 
of almonds handled. Those with existing facilities would also incur 
storage costs, although those costs may be fixed costs spread over a 
longer period of time. In any event, costs associated with storing 
reserve product are expected to be more than offset by the benefits of 
orderly marketing. In addition, the order was amended in 1996 to allow 
handlers to transfer their reserve obligation to other handlers. Thus, 
handlers with no storage facilities would now have the option to 
transfer their reserve withholding obligation to other handlers who 
could store the reserve almonds.
    Furthermore, almond production, like that of many agricultural 
commodities, can vary significantly from season to season due to a 
variety of factors. This in turn can contribute to wide fluctuations in 
prices. For example, California almond production over the past 10 
years has varied from a low of 366.7 million kernelweight pounds in 
1995 to a high of 756.5 million kernelweight pounds in 1997. Grower 
prices for the past 10 years, as reported by the NASS, have varied from 
a low of $.93 per pound in 1990 to $2.48 per pound in 1995.
    In addition, returns to growers have reportedly decreased by as 
much as $1.00 per pound since the beginning of the 1998-99 crop year. 
It is believed that a larger than anticipated 1998 crop, market 
speculation, and an estimated record 1999 crop have contributed to the 
depressed grower prices. Such swings in supplies and price levels can 
result in market instability and uncertainty for growers, handlers, 
buyers and consumers. While the benefits of this rulemaking may be 
difficult to quantify, any stabilizing effects of volume regulation 
would impact both small and large handlers positively by helping them 
maintain orderly marketing conditions through supply management.
    Regarding alternatives, the Board considered not recommending 
volume regulation this season. As previously mentioned, three Board 
members and some observers at the Board's meetings

[[Page 43301]]

expressed their view that the industry should continue to focus on 
increasing the demand for almonds rather than implementing a reserve. 
It was expressed that market risk can be managed by individual handlers 
through marketing tools such as forward contracting, rather than 
managing supply at the industry level. However, the majority of Board 
members supported the establishment of a reserve to help maintain 
orderly marketing conditions so that the industry can successfully 
manage the projected large 1999 almond crop. The Board also deliberated 
the merits of allocating the reserve to noncompetitive outlets or 
ultimately releasing part or all of the reserve as salable. The Board 
decided to delay this decision until next spring when additional 
information, including an estimate of the 2000-2001 crop, is available. 
However, handlers may sell reserve almonds to authorized reserve 
outlets at any time pursuant to an agency agreement as authorized in 
Sec. 981.67 of the order, and receive credit against their withholding 
obligation.
    This rule may impose some additional reporting, recordkeeping and 
other compliance requirements on both small and large handlers. 
Handlers who choose to divert their reserve almonds to authorized 
outlets would have to file certain reports with the Board. This 
requirement is the same as that applied during the 1991-92 and 1994-95 
crop years when almond reserves were last established. Most of the 
industry's handlers handled almonds during those years and are thus 
familiar with the required reports. These reports have been previously 
approved by the Office of Management and Budget (OMB) under OMB Control 
No. 0581-0071. 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 Board's meetings were widely publicized throughout 
the almond industry and all interested persons were invited to attend 
and participate in Board deliberations. Like all Board meetings, the 
May 12 and July 12, 1999, meetings were public meetings and all 
entities, both large and small, were able to express their views on 
this issue. The Board itself is composed of 10 members, of which 5 are 
producers and 5 are handlers.
    Also, the Board has a number of appointed committees to review 
certain issues and make recommendations to the Board. The Board's 
Reserve Committee met on April 1, May 11, and July 12, 1999, and 
presented its recommendations to the Board at meetings on May 12 and 
July 12, 1999. All of these meetings were open to the public, and both 
large and small entities were able to participate and express their 
views. Finally, interested persons are invited to submit information on 
the regulatory and informational impacts of this action on small 
businesses.
    A 30-day comment period is provided to allow interested persons the 
opportunity to respond to this proposal. Thirty days is deemed 
appropriate because any salable and reserve percentages established 
based on this proposal should be implemented as soon as possible. The 
beginning of the 1999-2000 crop year is August 1. All written comments 
received within the comment period will be considered before a final 
determination is made on this matter.

List of Subjects in 7 CFR Part 981

    Almonds, Marketing agreements, Nuts, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 981 is 
proposed to be amended as follows:

PART 981--ALMONDS GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 981 continues to read as 
follows:

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

    Note: This section will not appear in the Code of Federal 
Regulations.

    2. In Part 981, Sec. 981.240 is added to read as follows:


Sec. 981.240  Salable and reserve percentages for almonds during the 
crop year beginning on August 1, 1999.

    The salable and reserve percentages during the crop year beginning 
on August 1, 1999, shall be 77.64 percent and 22.36 percent, 
respectively.

    Dated: July 29, 1999.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-20499 Filed 8-9-99; 8:45 am]
BILLING CODE 3410-02-P