[Federal Register Volume 64, Number 155 (Thursday, August 12, 1999)]
[Rules and Regulations]
[Pages 43897-43902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-20877]



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  Federal Register / Vol. 64, No. 155 / Thursday, August 12, 1999 / 
Rules and Regulations  

[[Page 43897]]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 989

[Docket No. FV99-989-4 FR]


Raisins Produced From Grapes Grown in California; Use of 
Estimated Trade Demand to Compute Volume Regulation Percentages

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule authorizes using an estimated trade demand figure to 
compute volume regulation percentages for 1999-2000 crop Natural (sun-
dried) Seedless (NS) raisins covered under the Federal marketing order 
for California raisins (order). The order regulates the handling of 
raisins produced from grapes grown in California and is administered 
locally by the Raisin Administrative Committee (Committee). This rule 
provides parameters for implementing volume regulation for 1999-2000 
crop NS raisins if supplies are short for the purposes of maintaining a 
portion of the industry's export markets and stabilizing the domestic 
market.

EFFECTIVE DATE: This final rule becomes effective August 13, 1999.

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: (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, or Fax: 
(202) 720-5698.

SUPPLEMENTARY INFORMATION: 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.
    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 of Agriculture (Department) is issuing this rule in 
conformance with Executive Order 12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This 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 authorizes using an estimated trade demand figure to 
compute volume regulation percentages for 1999-2000 crop NS raisins 
covered under the order. This rule provides parameters for implementing 
volume regulation for 1999-2000 crop NS raisins if supplies are short 
for the purposes of maintaining a portion of the industry's export 
markets and stabilizing the domestic market. This action was 
recommended by the Committee at a meeting on April 13, 1999.

Volume Regulation Authority

    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 (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 and time frames 
to be followed in establishing volume regulation for each crop year, 
which runs from August 1 through July 31. The Committee must meet by 
August 15 to review data regarding raisin supplies. At that time, the 
Committee computes a trade demand for each varietal type for which a 
free tonnage percentage might be recommended. Trade demand is equal to 
90 percent of the prior year's domestic and export shipments, adjusted 
by subtracting carryin inventory from the prior year, and adding a 
desirable carryout inventory for the end of the current year.
    By October 5, the Committee must announce preliminary crop 
estimates

[[Page 43898]]

and determine whether volume regulation is warranted for the varietal 
types for which it computed trade demands. Preliminary volume 
regulation percentages are then computed to release 85 percent of the 
computed trade demand if a field price has been established, or 65 
percent of the trade demand if no field price has been established. 
Field price is the price that handlers pay for raisins from producers. 
By February 15, the Committee must recommend final free and reserve 
percentages which release the full trade demand.
    The order also requires that, when volume regulation is in effect, 
two offers of reserve raisins must be made available to handlers for 
free use. These offers are known as the ``10 plus 10'' offers. Each 
offer consists of a quantity of reserve raisins equal to 10 percent of 
the prior year's shipments. The order also specifies that ``10 plus 
10'' raisins must be sold to handlers at the current field price plus a 
3 percent surcharge and Committee costs.

Development of Export Markets

    With the exception of 10 crop years, volume regulation has been 
utilized for NS raisins since the order's inception in 1949. The 
procedures for determining volume regulation percentages have been 
modified over the years to address the industry's needs. In the past, 
volume regulation has been utilized primarily to help the industry 
manage an oversupply of raisins. Through the use of various marketing 
programs operated through reserve pools and other industry promotional 
activities, the industry has also developed its export markets which 
now account for almost 40 percent of the industry's shipments.
    Between 1980-85, exports of California NS raisins averaged about 26 
percent (53,700 packed tons, or raisins which have been processed) of 
the industry's total NS raisin shipments (207,600 packed tons, 
excluding government purchases) per year. Between 1993-97, NS raisin 
exports increased to average about 37 percent (112,000 packed tons) of 
the industry's total NS raisin shipments (300,000 packed tons, 
excluding government purchases) per year.

Export Replacement Offer

    One market development program operated through reserve pools, the 
Export Replacement Offer (ERO), has helped California raisins to be 
price competitive in export markets. Prices in export markets are 
generally lower than the domestic market. The ERO began in the early 
1980's as a ``raisin-back'' program whereby handlers who exported 
California raisins could purchase, at a reduced price, reserve raisins 
for free use. This effectively blended down the cost of the raisins 
which were exported. The NS raisin ERO was changed to a ``cash-back'' 
program in 1996 whereby handlers could receive cash from the reserve 
pool for export shipments.
    Over the past 5 years, an average of 43,000 natural condition tons 
(unprocessed raisins) of reserve raisins have been utilized per year to 
fund the ERO. Financing for the cash-back ERO program has been 
generated primarily from the Committee's ``10 plus 10'' sales of 
reserve raisins to handlers for free use. Under the 1996 and 1997 cash-
back ERO programs, an average of $57 million of reserve pool funds were 
utilized to support the export of about 113,000 packed tons of NS 
raisins.

Current Industry Situation--Potential of Two, Consecutive Short 
Crops

    The Committee is concerned with maintaining the ERO program through 
potentially two, consecutive short crop years. The 1998-99 California 
raisin crop was much smaller than average due to the combined effect of 
adverse crop conditions created by the weather phenomenon known as El 
Nino, scattered rain during the fall harvest, and a shortage of labor 
once the grapes were ready for harvest. The 1998-99 NS raisin crop 
totaled about 235,000 natural condition tons, about 35 percent lower 
than the 10-year average of 360,183 natural condition tons. Volume 
regulation was not implemented for 1998-99 NS raisins, the major 
varietal type of California raisin, for the first time in 16 years. 
However, about 60,000 natural condition tons of 1997-98 reserve raisins 
were available to maintain the industry's ERO program.
    The Committee is concerned that the 1999-2000 California raisin 
crop may also be short due to an April 1999 frost and anticipated high 
demand for raisin-variety grapes from wineries this fall. If no 1999-
2000 reserve is established, the industry will not be able to continue 
the ERO program. Without a program to support its export sales, the 
Committee is concerned that the industry could lose a significant 
portion, perhaps 50 percent, of those markets. Further, handlers who 
could not sell their raisins in export may sell their raisins 
domestically. Annual domestic shipments of NS raisins for the past 5 
years have averaged about 188,000 packed tons. The Committee is 
concerned that additional raisins sold into the domestic market could 
create instability.
    Thus, the Committee formed a working group to review this issue and 
consider options to continue to support its export sales while 
maintaining stability in the domestic market. After several meetings, 
the working group presented its recommendation to a subcommittee, and 
then in turn to the Committee. At a meeting on April 13, 1999, the 
Committee recommended adding a new paragraph to Sec. 989.154 of the 
order's administrative rules and regulations that provides parameters 
for implementing volume regulation for 1999-2000 crop NS raisins if 
supplies are short. Section 989.154 is divided into two paragraphs, (a) 
and (b). Paragraph (a) pertains to an existing regulation regarding 
desirable carryout levels, and paragraph (b) pertains to estimated 
trade demand.

Implementing Volume Regulation if Supplies are Short to Maintain 
the ERO

    Section 989.54(e) contains a list of factors that the Committee 
must consider when computing volume regulation percentages. Factor (4) 
states that the Committee must consider, if different than the computed 
trade demand, the estimated trade demand for raisins in free tonnage 
outlets. The Committee recommended using an estimated trade demand 
figure for 1999-2000 crop NS raisins, or a figure different than the 
computed trade demand, to compute volume regulation percentages to 
create a reserve if supplies are short. This will allow the Committee 
to continue its ERO program thereby maintaining a portion of its export 
sales and stabilizing the domestic market.
    Specifically, the Committee recommended that an estimated trade 
demand be utilized to compute preliminary, interim, and final free and 
reserve percentages for 1999-2000 crop NS raisins if the crop estimate 
is equal to, less than, or no more than 10 percent greater than the 
trade demand as computed according to the formula specified in 
Sec. 989.54(a) of the order. If an estimated trade demand figure is 
utilized, the final reserve percentage will be no more than 10 percent. 
Finally, volume regulation will not be implemented if the 1999-2000 
crop estimate is below 235,000 natural condition tons.
    To illustrate how this will work, the Committee will compute a 
trade demand for NS raisins by August 15 (as an example, 260,000 
natural condition tons). At that time, the Committee will also announce 
its intention to use an estimated trade demand of 235,000 natural 
condition tons to compute

[[Page 43899]]

volume regulation percentages for the 1999-2000 crop.

Crop Estimate Below 235,000 Tons--No Regulation

    The Committee will meet by October 5 to announce a NS crop estimate 
and determine whether volume regulation is warranted. If the 1999-2000 
crop estimate is under 235,000 natural condition tons, volume 
regulation will not be recommended. With a crop of 235,000 natural 
condition tons, and about 82,000 natural condition tons of NS raisins 
carried forward from the 1998-99 crop year, a supply of about 317,000 
natural condition tons of raisins would be available for the 1999-2000 
crop year. As previously mentioned, annual NS raisin shipments average 
about 300,000 packed tons (about 320,000 natural condition tons), 
excluding government purchases.
    With an available supply of only 317,000 natural condition tons of 
NS raisins, the Committee believes that the industry's first priority 
would be to satisfy the needs of the domestic market, which absorbs 
annually an average of about 188,000 packed tons (200,000 natural 
condition tons). Assuming that 200,000 natural condition tons were 
shipped domestically, the Committee estimates that, with no ERO program 
to help California raisins be price competitive in export markets, the 
industry would export about half of its usual tonnage, or about 60,000 
natural condition tons. The remaining 57,000 natural condition tons 
would likely be held in inventory for the following 2000-2001 crop 
year. Annual carryout inventory for NS raisins for the past 5 years has 
averaged about 100,000 natural condition tons.

Crop Estimate Between 235,000 Tons and 10 Percent Above the 
Computed Trade Demand--Volume Regulation

    If the October 1999-2000 crop estimate for NS raisins falls between 
235,000 natural condition tons and 10 percent above the computed trade 
demand, the Committee will use an estimated trade demand figure to 
compute preliminary free and reserve percentages for the 1999-2000 
crop. Thus, using the 260,000 natural condition ton computed trade 
demand figure, an estimated trade demand will be used to compute volume 
regulation percentages if the crop estimate falls between 235,000 and 
286,000 natural condition tons.
    The order specifies that preliminary percentages compute to release 
85 percent of the computed trade demand as free tonnage once a field 
price is established. Producers are paid the field price for their free 
tonnage. Normally, when preliminary percentages are computed, producers 
receive an initial payment from handlers for 85 percent of the computed 
trade demand (or 65 percent of the trade demand if no field price has 
been established). Using the 260,000 natural condition ton computed 
trade demand figure, this would equate to 238,000 natural condition 
tons. However, if the lower, 235,000 natural condition ton estimated 
trade demand figure were utilized to compute preliminary percentages, 
producers would receive an initial payment from handlers for only 
199,750 natural condition tons, or 71 percent of the computed trade 
demand.
    The Committee is concerned with the preliminary percentage 
computation using an estimated trade demand and its impact on producer 
returns. The Committee wants to ensure that producers receive the field 
price for as much of their crop as possible early in the season while 
still establishing a small pool of reserve raisins to maintain the ERO. 
Thus, the Committee recommended that, if an estimated trade demand 
figure is utilized, preliminary percentages be computed to release 85 
percent of the crop estimate. However, the order specifies that 
preliminary percentages be computed to release 85 percent of the trade 
demand, not the crop estimate, once a field price is established.
    To achieve the same objective but remain within the order's 
parameters, the Committee could compute interim percentages to equal 85 
percent free and 15 percent reserve. Pursuant to Sec. 989.54(c), 
interim percentages may be computed prior to February 15 to release 
less than the trade demand. As an example, with a crop estimate of 
265,000 natural condition tons and an estimated trade demand of 238,500 
natural condition tons, a free percentage of 85 percent of the crop 
estimate would release 225,250 natural condition tons of raisins, or 94 
percent of the estimated trade demand. This action will mollify the 
impact of implementing volume regulation when supplies are short on 
producers by allowing them to be paid for as much of their free tonnage 
raisins as possible early in the season.
    Finally, the Committee will meet by February 15 to compute final 
free and reserve percentages. The Committee recommended that if an 
estimated trade demand figure is used to compute percentages, the final 
reserve percentage be computed to equal no more than 10 percent. 
Producers would ultimately be paid the field price for 90 percent of 
their crop, or their free tonnage.
    The remaining 10 percent of the crop would be held in reserve and 
offered for sale to handlers in the ``10 plus 10'' offers. As 
previously described, the ``10 plus 10'' offers are two offers of 
reserve raisins that are made available to handlers for free use. The 
order specifies that each offer consists of a quantity of reserve 
raisins equal to 10 percent of the prior year's shipments. This 
requirement would not be met if volume regulation were implemented when 
raisin supplies were short. However, all of the raisins held in reserve 
would be made available to handlers for free use. Handlers would pay 
the Committee for the ``10 plus 10'' raisins and that money would be 
utilized to fund a 1999-2000 ERO program. Any unused 1999-2000 reserve 
pool funds could be loaned forward to initiate a 2000-2001 ERO program. 
However, the Committee recommended that such funds be paid back to the 
1999-2000 reserve pool and ultimately be returned to 1999-2000 equity 
holders.

Crop Estimate More Than 10 Percent Above the Computed Trade Demand

    Finally, the Committee recommended that, if the 1999-2000 crop 
estimate is more than 10 percent greater than the computed trade demand 
(or above 286,000 natural condition tons in the earlier example), the 
computed trade demand (as an example, 260,000 natural condition tons) 
be utilized to compute volume regulation percentages. Under this 
scenario, enough raisins (over 28,000 natural condition tons) would be 
available in reserve to continue the ERO program.
    It is anticipated that allowing the use of an estimated trade 
demand figure to compute volume regulation percentages for 1999-2000 
crop NS raisins if supplies are short will assist the industry in 
maintaining a portion of its export markets and stabilize the domestic 
market. If the crop estimate is below 235,000 natural condition tons, 
no volume regulation will be implemented. If this occurs, it is 
anticipated that domestic market needs would be met, while export 
markets would likely not be satisfied.
    However, if the crop falls between 235,000 natural condition tons 
and slightly higher than the computed trade demand, establishing a 
small reserve pool will allow the industry to not only satisfy the 
needs of the domestic market, but also maintain a portion of its export 
sales, which now account for almost 40 percent of the industry's annual 
shipments. By maintaining an ERO program, even at a reduced level, 
exporters could continue to be price

[[Page 43900]]

competitive and sell their raisins abroad. The domestic market would 
remain stable because it would not have to absorb any additional 
raisins that handlers could not afford to sell in export markets.

Final Regulatory Flexibility Analysis

    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 adds a new paragraph to Sec. 989.154 of the order's 
administrative rules and regulations that provides parameters for using 
an estimated trade demand figure specified in Sec. 989.54(e)(4) of the 
order to compute volume regulation percentages for 1999-2000 crop NS 
raisins. This rule provides guidelines for the use of volume regulation 
if 1999-2000 NS raisin supplies are short for the purposes of 
maintaining a portion of the industry's export markets and stabilizing 
the domestic market.
    Regarding the impact of the action on producers and handlers, if an 
estimated trade demand figure is used to compute volume regulation 
percentages, the final reserve percentage would compute to no more than 
10 percent. Producers would thus be paid the field price for at least 
90 percent of their crop, but would lose being paid the field price for 
about 10 percent of their crop that would go into a reserve pool. The 
field price for NS raisins for the past 5 years has averaged $1,216 per 
ton. Handlers in turn would purchase 90 percent of their raisins 
directly from producers at the field price, but would have to buy 
remaining raisins out of the reserve pool at a higher price (field 
price plus 3 percent and Committee costs). The ``10 plus 10'' price of 
NS reserve raisins has averaged about $100 higher than the field price 
for the past 5 years, or $1,316 per ton. Proceeds from the ``10 plus 
10'' sales would be used to support export sales.
    While there may be some initial costs for both producers and 
handlers, the long term benefits of this action far outweigh the costs. 
The Committee believes that with no reserve pool and hence no ERO 
program, export sales would decline dramatically, perhaps up to 50 
percent. Handlers would likely sell into the domestic market raisins 
that they were unable to sell into lower priced export markets. 
Additional NS raisins sold into the domestic market, which typically 
absorbs about 188,000 packed tons, could create instability. The 
industry would likely lose a substantial portion of its export markets, 
which now account for about 37 percent (112,000 packed tons) of the 
industry's annual shipments (300,000 packed tons, excluding government 
purchases). Committee members have also commented that, once export 
markets were lost, it would be difficult and costly for the industry to 
recover those sales.
    Maintaining the industry's export markets will, in turn, help the 
industry maximize its 1999-2000 total shipments and prevent handlers 
from carrying forward large quantities of inventory into the 2000-2001 
crop year. If the industry is unable to maximize its 1999-2000 
shipments, carryin inventory could be high which would result in a 
lower computed trade demand figure for the 2000-2001 crop year. If the 
industry returns to its pattern of relatively large crops in 2000-2001, 
a low trade demand and large crop estimate would compute to a low free 
tonnage percentage. Since producers are paid significantly more for 
their free tonnage than for reserve tonnage, this would mean reduced 
returns to producers. Projected reduced 2000-2001 returns to raisin 
producers, coupled with the risks of rain and labor shortages during 
harvest, may influence producers to ``go green,'' or sell their raisin-
variety grapes to the fresh-grape, wine, or juice concentrate markets. 
Additional supplies to those outlets could potentially reduce ``green'' 
returns as well.
    A similar scenario occurred in the California raisin industry in 
the early 1980's where the industry experienced two consecutive, short 
crop years. The 1981-82 and 1982-83 crops were short followed by 
relatively large crops for the remainder of the 1980's. The producer 
field price for NS raisins was $1,275 per ton for 1981-82 crop raisins, 
and $1,300 per ton for 1982-83 crop raisins. No volume regulation was 
implemented in 1982-83. However, a large inventory of high-priced 
raisins was carried forward into the 1983-84 crop year. When coupled 
with the largest crop on record at the time, volume regulation was 
implemented for the 1983-84 crop with the free tonnage percentage at a 
historically low 37.5 percent. By 1984, the producer field price for 
free tonnage raisins fell to $700 per ton, causing producers to 
experience large financial losses. Thus, the industry wants to help 
avoid a repeat of what happened in the 1980's by utilizing the Federal 
order to maintain export sales and provide stability in the domestic 
market.
    Several alternatives to this action were considered by the 
industry. As previously mentioned, the Committee formed a working group 
to address its concerns. The working group considered utilizing money 
remaining in the 1997-98 reserve pool to fund some portion of an ERO. 
About $22 million would be available. However, because there was no 
1998-99 reserve, the 1997-98 pool will ultimately fund at least 16 
months of an ERO program. Ideally, the Committee would like to see each 
reserve pool support one year of an ERO program. Unfortunately, because 
of variances in crop size, the spread in price between the domestic and 
export markets, and other factors, this goal is not always met. In any 
event, the Committee agreed that any remaining 1997-98 reserve pool 
funds could be loaned forward to initiate a 1999-2000 ERO program, but 
those funds would have to be paid back and ultimately returned to the 
1997-98 equity holders.
    A second alternative considered by the working group was to fund 
the ERO through an increased assessment rate. The current assessment 
rate is $8.50 per ton for raisins acquired by handlers. The Committee 
estimated that the rate would need to be increased to at least $60 per 
ton for acquired raisins. The Department had concerns with such an 
increase as well as whether the ERO could be funded through the order's 
assessment authority.
    A third alternative considered by the working group was to change 
the order's desirable carryout formula. Desirable carryout is part of 
the order's trade demand formula and is the amount of

[[Page 43901]]

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. Desirable carryout is specified in the order's 
regulations and is equal to 2\1/2\ months of the prior year's 
shipments. Changing the desirable carryout changes the trade demand 
computation. The working group considered developing a sliding scale 
which would match crop estimates with levels of carryout inventory. 
However, after much discussion, the working group ultimately 
recommended to the Committee using an estimated trade demand to compute 
volume regulation percentages next year if NS raisin supplies are 
short.
    There are some reporting, recordkeeping and other compliance 
requirements under the order. The reporting and recordkeeping burdens 
are necessary for compliance purposes and for developing statistical 
data for maintenance of the program. If volume regulation were 
implemented this year using an estimated trade demand figure, the 
requirements on handlers would be identical to those requirements 
imposed in past seasons when volume regulation was implemented. As 
previously stated, volume regulation has been utilized in all but 10 
seasons for NS raisins since the inception of the order in 1949. Thus, 
handlers are familiar with the requirements.
    Furthermore, this action imposes no additional reporting or 
recordkeeping burden on either small or large handlers. The forms 
require information which is readily available from handler records and 
which can be provided without data processing equipment or trained 
statistical staff. The information and recordkeeping requirements have 
been previously approved by the Office of Management and Budget (OMB) 
under OMB Control No. 0581-0178. As with other similar 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 working group meetings held on 
February 24, March 10, March 18, April 6, 1999, and the subcommittee 
and Committee meetings on April 13, 1999, where this action was 
deliberated were all public meetings widely publicized throughout the 
raisin industry. The Committee held a follow-up meeting on June 10, 
1999, to further educate the industry on its recommendation. All 
interested persons were invited to attend the meetings and participate 
in the industry's deliberations.
    Further, two major industry organizations, Sun-Maid Growers of 
California (Sun-Maid) and the Raisin Bargaining Association (RBA), have 
held meetings to provide additional information to their members on the 
Committee's recommendation. Sun-Maid and the RBA represent about 70 
percent of the California raisin industry.
    A proposed rule concerning this action was published in the Federal 
Register on June 28, 1999 (64 FR 34571). A 20-day comment period, which 
ended on July 19, 1999, was provided to allow interested persons to 
respond to this proposal. Copies of the rule were mailed to all 
Committee members and alternates, handlers, and producers. The rule was 
also made available through the Internet by the Office of the Federal 
Register. Three comments were received.
    All three commenters expressed concern with the impact of 
implementing volume regulation in short crop years on producers. One 
commenter stated that he supports maintaining the industry's export 
markets, but only if it is profitable for producers. The commenters 
also stated that the ERO program benefits handlers with producers 
assuming the burden of financing the program.
    The evidence before the Committee indicates that the domestic 
market can currently only absorb a limited quantity of California 
raisins annually, or about 188,000 packed tons (200,000 natural 
condition tons). If the crop significantly exceeded this level and if 
no ERO program were established, handlers who could not sell their 
raisins in export might sell their raisins domestically. Additional NS 
raisins sold into the domestic market would create instability and 
reduce producer returns.
    In addition, while the domestic market generates the highest return 
for producers (about $1,216 per ton), the export market generates the 
second highest level of return (about $800 per ton). Other outlets for 
raisins such as government purchase, diversion, and distilleries or 
animal feed provide much lower returns. Thus, since the domestic market 
can only absorb a limited amount of raisins, it is prudent to help 
ensure that as much of the remainder of the crop as possible be sold to 
the next profitable outlet--export.
    Two of the commenters expressed concern with the relationship 
between the world supply of raisins and the proposal's concern with a 
potential loss of export markets. Early season forecasts predict 
relatively smaller crops in some other raisin-producing countries. The 
commenters contend that, if the world supply of raisins this year is 
short, along with a short California crop, the California raisin 
industry would not lose its export markets because other raisin-
producing countries would not be able to supply those markets.
    Even in light of a relatively short world supply of raisins, 
however, an ERO program would be necessary to continue to help 
California raisins attract buyers in export markets. Raisins are not a 
necessary product for consumers, and export markets would disappear if 
prices sharply advanced to free tonnage levels. It would be very 
difficult and costly for the industry to regain export markets once 
they were lost.
    One of the commenters expressed concern with the composition of the 
Committee, and another commenter expressed concern with the composition 
of the working group which deliberated the issue. Specifically, one 
commenter contends that the Committee is suppose to be made up of an 
equal number of producers and handlers, and that many handlers who are 
also producers hold producer positions on the Committee. The commenter 
contends that this results in Committee discussions which usually favor 
the interests of handlers rather than producers.
    Consistent with the terms of the order, the Committee is composed 
of 47 members--35 producers, 10 handlers, 1 representing the RBA, and 1 
public member. Nothing under the current order prohibits a producer 
member from having a handler interest, or a handler member from having 
a producer interest. In addition, the Committee can change its 
composition through formal rulemaking (public hearing and producer 
referendum) if desired.
    As stated above, one commenter expressed concern with the make-up 
of the working group which held preliminary meetings to discuss this 
issue. The commenter contends that the working group was composed of 
five Committee members--one public member and four members affiliated 
with a handler. However, the working group was composed of 13 Committee 
members representing a cross-section of producers and handlers. 
Further, all of the working group meetings were open to any interested 
person who would have liked to attend.
    The Department believes that the group to which the commenter is 
referring is the group of Committee members who responded to industry 
questions on this issue at the meeting on June 10, 1999. That group 
consisted of only a few members of the original

[[Page 43902]]

working group who visited the Department's headquarters' office in 
April 1999 to discuss the Committee's proposal.
    Finally, regardless of the recommendation of the Committee or its 
working group, it is the Department of Agriculture that makes the 
decision to adopt this rule after a thorough consideration of all the 
evidence and views of the entire industry.
    Accordingly, no changes have been made to the rule as proposed, 
based on the comments received.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Committee, the comments 
received in response to the proposed rule, and other available 
information, it is hereby found that this rule, as hereinafter set 
forth, will tend to effectuate the declared policy of the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because: (1) This action needs to be in 
effect by August 12, 1999, which is the date of the Committee's meeting 
where the 1999-2000 trade demand will be announced; (2) producers and 
handlers are aware of this action which was recommended at a public 
meeting; and (3) a 20-day comment period was provided in the proposed 
rule, and the comments received in response to that rule were addressed 
herein.

List of Subjects in 7 CFR Part 989

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

    For the reasons set forth in the preamble, 7 CFR part 989 is 
amended as follows:

PART 989--RAISINS PRODUCED FROM GRAPES GROWN IN CALIFORNIA

    1. The authority citation for 7 CFR part 989 continues to read as 
follows:

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

    2. The undesignated center heading preceding Sec. 989.154 is 
revised to read ``Marketing Policy.''
    3. Section 989.154 is revised to read as follows:


Sec. 989.154  Marketing policy computations.

    (a) Desirable carryout levels. The desirable carryout levels to be 
used in computing and announcing a crop year's marketing policy shall 
be equal to total shipments of free tonnage of the prior crop year 
during August, September, and one-half of October, for each varietal 
type, converted to a natural condition basis: Provided, That, should 
the prior year's shipments be limited because of crop conditions, the 
Committee may select the total shipments during the months of August, 
September, and one-half of October during one of the three crop years 
preceding the prior crop year.
    (b) Estimated trade demand. Pursuant to Sec. 989.54(e)(4), 
estimated trade demand is a figure different than the trade demand 
computed according to the formula in Sec. 989.54(a). The Committee 
shall use an estimated trade demand to compute preliminary and interim 
free and reserve percentages, or determine such final percentages for 
recommendation to the Secretary for 1999-2000 crop Natural (sun-dried) 
Seedless (NS) raisins if the crop estimate is equal to, less than, or 
no more than 10 percent greater than the computed trade demand: 
Provided, That the final reserve percentage computed using such 
estimated trade demand shall be no more than 10 percent, and no reserve 
shall be established if the final 1999-2000 NS raisin crop estimate is 
less than 235,000 natural condition tons.


Sec. 989.157  [Amended]

    4. A new undesignated center heading is added preceding 
Sec. 989.157 to read ``Quality Control.''

    Dated: August 9, 1999.
Kathleen A. Merrigan,
Administrator, Agricultural Marketing Service.
[FR Doc. 99-20877 Filed 8-9-99; 1:55 pm]
BILLING CODE 3410-02-P