[Federal Register Volume 64, Number 165 (Thursday, August 26, 1999)]
[Proposed Rules]
[Pages 46603-46609]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-22253]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV99-905-3 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 1999-2000 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 September 10, 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: 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) 720-5698.


[[Page 46604]]


SUPPLEMENTARY INFORMATION: 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) 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 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\5/16\ 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 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 20. 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. The committee at its meeting on April 6, 
1999, recommended this action, by a unanimous vote. This action is 
similar to those taken in the previous two seasons (1997-98 and 1998-
99).
    For the seasons 1994-95, 1995-96, and 1996-97, returns for 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 (4/5 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. price is $4 to $6 a carton more than for the 
smaller sizes. In early October, the f.o.b. price for a size 27 
averages around $10.00 per carton. This compares to an average f.o.b. 
price of $5.50 per carton for size 56. By the end of the 11 week period 
covered in this rule, the f.o.b. price for large sizes drops to within 
$2 of the f.o.b. price for small sizes.
    In the three seasons prior to 1997-98, prices of red seedless 
grapefruit fell from a weighted average f.o.b. price of $7.80 per 
carton to an average f.o.b. price 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 those three seasons, the market did not recover, and the f.o.b. 
price 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

[[Page 46605]]

grapefruit early in the season contributes 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 per carton in 1991-92 to around $1.50 per carton 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 per 
carton. 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 a weekly percentage of size 
regulation during the first 11 weeks of the 1997-98 and 1998-99 
seasons. 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 its 
recommendations. The Committee has since used this regulation to the 
betterment of the industry. Prices have increased, and movement has 
been more stable. Actual weekly percentages established during the 11 
week period during the 1997-98 season were 50 percent for the first 3 
weeks, and 35 percent for the other 8 weeks. Actual weekly percentages 
established during the 11 week period during the 1998-99 season were 37 
percent for the first 3 weeks, and 32 percent for the other 8 weeks.
    In making its recommendation for the upcoming season, the committee 
reviewed its experiences from the past seasons. The committee believes 
establishing weekly percentages during the last two seasons was 
successful. The committee examined shipment data covering the 11 week 
regulatory period for the last two regulated seasons and the three 
prior seasons. The information contained the amounts and percentages of 
sizes 48 and 56 shipped during each week and weekly f.o.b. price 
figures. During the 11 week period, the regulations were successful at 
helping maintain prices at a higher level than previously, 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. prices for these weeks were $6.28 for the 1996-97 season, $6.55 
for the 1997-98 season, and $7.63 for the 1998-99 season. Total fresh 
shipments for the 1998-99 season are estimated at 14.6 million cartons 
of red grapefruit.
    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 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, the last season prior to 
establishing percentage size regulations. Prices for the same sizes 
fell only 13, 11, 14, and 11 percent, respectively, during the same 
period last season with regulation. In fact, prices for all sizes were 
firmer during this period for last season when compared to the 1996-97 
season, with the weighted average price dropping only 11 percent during 
this period as compared to 22 percent during the 1996-97 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, and 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 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 in 1997-98, as small sizes 
were used to supply export customers with preferences for small sized 
grapefruit.
    The committee recommended 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 would recur without 
this action. The committee thought that to provide the most 
flexibility, the weekly percentage should be set at 25 percent for each 
of the 11 weeks in the regulated period. The committee believes it is 
best to set regulation at the most restrictive level, and then relax 
the percentage as warranted by conditions later in the season. The 
committee intends to meet on a regular basis early in the season to 
consider adjustments in the weekly percentage rates, as was done in the 
previous two seasons.
    In its discussion, the committee recognized the need for and the 
benefits of the weekly percentage regulation. The committee 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 percentages are appropriate.
    Based on this information and the experiences from past seasons, 
the committee agreed to establish the weekly percentage at the most 
restrictive level. They can then meet in late August, or in September 
and October, as needed, when additional information is available, and 
determine whether the set percentage levels are appropriate. They said 
this is essentially what was done in the prior two years, and it had 
been very successful. For example, the committee met in May 1998, and 
recommended a weekly percentage of 25 percent for each of the first 11 
weeks of the 1998-99 season. In September, the committee met again, and 
recommended that the weekly percentage be relaxed. They met again in 
October, and did not recommend any further relaxation. Any changes to 
the weekly percentages 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 April 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 in past 
seasons as to weekly percentages, the committee

[[Page 46606]]

considered how past shipments had affected the market. Based on 
available statistical information, the committee members believed 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 234,000 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 1998-99 season remained close to the 250,000 
carton mark. 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. 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 
235,000 cartons of sizes 48 and/or 56 red seedless grapefruit per 
regulated week.
    In addition, the production area is suffering through a period of 
insufficient rainfall. 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 European and Asian markets. In past seasons, the European 
market has shown a strong demand for the smaller sized red seedless 
grapefruit. The reduction in shipments to these areas experienced 
during the last two years is expected to continue during the upcoming 
season. This reduction in demand could result in a greater amount of 
small sizes for remaining markets to absorb. These factors increase the 
need for restrictions to prevent the volume of small sizes from 
overwhelming all markets.
    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 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 is within the established limits. The committee staff 
would perform the specified calculations and provide them to each 
handler.
    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

[[Page 46607]]

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.
    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 many 
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 definition of prior period as the method that would 
provide each handler with an equitable base from which to establish 
shipments.
    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. 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.
    After considering the available information, the committee 
recommended that shipments of small sized red seedless grapefruit 
should be regulated this season.
    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 8e 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 industry and committee data, the average annual f.o.b. 
price for fresh Florida red grapefruit during the 1998-99 season was 
around $7.20 per 4/5 bushel carton, and total fresh shipments for the 
1998-99 season are estimated at 14.6 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 first 11 weeks of the 1999-2000 season, 
beginning the third Monday in September. 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

[[Page 46608]]

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 235,000 cartons of sizes 48 and/or 56 red seedless 
grapefruit per regulated week. If a 25 percent restriction on small 
sizes had been applied during the 11 week period in the three seasons 
prior to the 1997-98 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 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 costs 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. price is $4 to $6 a 
carton more than for the smaller sizes. In early October, the f.o.b. 
price for a size 27 averages around $10.00 per carton. This compares to 
an average f.o.b. price of $5.50 per carton for size 56. By the end of 
the 11 week period covered in this rule, the f.o.b. price for large 
sizes typically drops to within $2 of the f.o.b. price 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 per 
carton in 1991-92 to around $1.50 per carton 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 per carton. 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 is 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 
minimal effect on overall shipments. While this rule may necessitate 
spot picking, which could entail slightly higher harvesting costs, many 
in the industry are already using the practice. In addition, 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. Similar rules were enacted successfully the 
last two seasons. During the 11 week period, the regulations were 
successful in helping maintain prices at a higher level than in prior 
seasons, 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, $6.55 for the 1997-98 season and $7.63 
for the 1998-99 season.
    The rules were 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 25, 25, 20, and 14 percent, respectively, during the 
1997-98 season. Prices for the same sizes fell only 13, 11, 14, and 11 
percent, respectively, during the same period last season with 
regulation. Prices for all sizes were firmer during this period last 
season when compared to the 1996-97 season, with the weighted average 
price dropping only 11 percent during this period last season as 
compared to 22 percent during the 1996-97 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 and larger sized grapefruit registering modest 
improvements.
    The report 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 1997-98 
season, as small sizes were used to supply export customers with 
preferences for small sized grapefruit.
    Over 50 percent of red seedless grapefruit are 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 the last 
two seasons 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. Accordingly, this 
action would provide the most beneficial results for the industry given 
any other alternatives.
    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 (44 U.S.C. Chapter 
35) 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,

[[Page 46609]]

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 April 6, 1999, 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 15-day comment period is provided to allow interested persons to 
respond to this proposal. Fifteen 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. This action is similar to those 
taken in the previous two seasons, and it was unanimously recommended 
by the committee. 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. Section 905.350 is revised 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 is 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) 9/20/99 through 9/26/99.................................         25
(b) 9/27/99 through 10/3/99.................................         25
(c) 10/4/99 through 10/10/99................................         25
(d) 10/11/99 through 10/17/99...............................         25
(e) 10/18/99 through 10/24/99...............................         25
(f) 10/25/99 through 10/31/99...............................         25
(g) 11/1/99 through 11/7/99.................................         25
(h) 11/8/99 through 11/14/99................................         25
(i) 11/15/99 through 11/21/99...............................         25
(j) 11/22/99 through 11/28/99...............................         25
(k) 11/29/99 through 12/5/99................................         25
------------------------------------------------------------------------

    Dated: August 23, 1999.
Bernadine M. Baker,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 99-22253 Filed 8-25-99; 8:45 am]
BILLING CODE 3410-02-P