[Federal Register Volume 64, Number 174 (Thursday, September 9, 1999)]
[Rules and Regulations]
[Pages 48938-48942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23377]


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DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 729

Commodity Credit Corporation

7 CFR Part 1446

RIN 0560-AF 81


1998-Crop Peanuts, National Poundage Quota, National Average 
Price Support Level for Quota and Additional Peanuts, and Minimum 
Commodity Credit Corporation Export Edible Sales Price for Additional 
Peanuts

AGENCIES: Farm Service Agency and Commodity Credit Corporation, USDA.

ACTION: Final rule.

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SUMMARY: The purpose of this final rule is to codify determinations 
made by the Secretary of Agriculture (Secretary) with respect to the 
1998 peanut crop: the national poundage quota for quota peanuts is 
established at 1,167,000 short tons (st); the national average support 
level for quota peanuts is $610 per st; the national average support 
level for additional peanuts is set at $175 per st; and the minimum 
Commodity Credit Corporation (CCC) export edible sales price for price 
support loan inventory additional peanuts is $400 per st. The poundage 
quota is established pursuant to statutory requirements contained in 
the Agricultural Adjustment Act of 1938, as amended (the 1938 Act). The 
determination of the national average support levels for quota and 
additional peanuts was made pursuant to the statutory requirements of 
the Federal Agriculture Improvement and Reform Act of 1996 (the 1996 
Act). The determination and announcement of the minimum export edible 
sale price for additional peanuts is a discretionary action made to 
facilitate the negotiation of private contracts for export edible 
peanuts.

EFFECTIVE DATE: September 9, 1999.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Robison, USDA, Farm Service 
Agency, STOP 0514, 1400 Independence Avenue, SW,

[[Page 48939]]

Washington, DC 20250-0514, telephone 202-720-9255. Copies of the cost-
benefit assessment prepared for this rule can be obtained from Mr. 
Robison.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This final rule has been determined to be significant for purposes 
of Executive Order 12866 and, therefore, has been reviewed by OMB.

Federal Assistance Program

    The title and number of the Federal Assistance Program, as found in 
the Catalog of Federal Domestic Assistance, to which this rule applies 
are: Commodity Loans and Purchases--10.051.

Executive Order 12988

    This final rule has been reviewed in accordance with Executive 
Order 12988. The provisions of this final rule do not preempt State 
laws, are not retroactive, and do not involve administrative appeals.

Paperwork Reduction Act

    These proposed amendments do not contain information collections 
that require clearance by the Office of Management and Budget (OMB) 
under the provisions of 44 U.S.C. Chapter 35.

Regulatory Flexibility Act

    It has been determined that the Regulatory Flexibility Act is not 
applicable to this final rule because the Farm Service Agency (FSA) nor 
Commodity Credit Corporation (CCC) are required by 5 U.S.C. 553 or any 
other provision of law to publish a notice of proposed rulemaking with 
respect to the subject of these determinations.

Unfunded Federal Mandates

    This rule contains no Federal mandates under the regulatory 
provisions of Title II of the Unfunded Mandate Reform Act (UMRA), for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
UMRA.

Background

A. Announcement of the Quota

    Peanut producers voting in a mail referendum December 1 through 4, 
1997, approved poundage quotas for the 1998 through 2002 marketing 
years (MY) by 94.8 percent. Therefore, the Secretary must offer a 1998-
crop peanut program.
    Section 358-1(a)(1) of the 1938 Act, as amended by the 1996 Act, 
requires that the national poundage quota for peanuts for each of the 
1996 through 2002 MYs be established by the Secretary at a level that 
is equal to the quantity of peanuts (in tons) that the Secretary 
estimates will be devoted in each MY to domestic edible (excluding 
seed) and related uses. As to seed, section 358-1(b)(2)(B) of the 1938 
Act, as amended, provides that a temporary allocation of quota pounds 
for the MY only shall be made to producers for each of the 1996 through 
2002 MY and that the temporary seed quota allocation shall be equal to 
the pounds of seed peanuts planted on the farm as may be adjusted and 
determined under regulations prescribed by the Secretary. The MY for 
1998-crop peanuts runs from August 1, 1998, through July 31, 1999.
    The national poundage quota for the 1998 MY was established at 
1,167,000 st, based on the following data:

    Estimated Domestic Edible and Related Uses for 1998-Crop Peanuts
------------------------------------------------------------------------
                                                           Farmer stock
                          Item                              equivalent
                                                           (short tons)
------------------------------------------------------------------------
Domestic edible:
  Domestic production:
    For domestic food use...............................         950,500
    On-farm and local sales.............................           9,500
Related uses:
  Crushing residual.....................................         125,000
  Shrinkage and other losses............................          38,000
Segregation 2 and 3 loan:
  Transfers to quota loan...............................           5,000
Under production........................................          39,000
    Total...............................................       1,167,000
------------------------------------------------------------------------

    The estimate of MY 1998 domestic food use of peanuts was developed 
in two steps. First, the farmer stock equivalent of 1,105,500 st was 
estimated by the USDA Interagency Commodity Estimates Committee (ICEC). 
Second, this estimate was reduced by 155,000 st to exclude peanut 
imports, peanut butter imports, and peanut butter exports. Although 
estimates of domestic edible utilization typically include product 
exports, peanut butter exports are generally either made from, or may 
otherwise be credited under section 358(e) of the 1938 Act as being 
made from additional peanuts. MY 1998 farm use and local sales were 
estimated at 1 percent of ICEC's MY 1998 production estimate. This 
percentage reflects the average difference between USDA production data 
and Federal-State Inspection Service inspection data. About one-half of 
farm use and local sales is allocated to food use and the remainder to 
seed, and seed is excluded from quota determinations under amendments 
to the 1938 Act by the 1996 Act.
    The crushing residual represents the farmer stock equivalent weight 
of crushing grade kernels shelled from quota peanuts. In any given lot 
of farmer stock peanuts, a portion of such peanuts is only suitable for 
the crushing market. The quota consists of the edible and crushing 
content of the farmer stock weight of quota peanuts. The crushing 
residual identified above reflects the assumption that crushing grade 
peanuts will be about 12 percent, on a farmer stock basis, of the total 
of MY 1998 domestic production.
    The allowance for shrinkage and other losses is an estimate of 
reduced kernel weight available for milling as well as for kernel 
losses due to damage, fire, and spillage. These losses were estimated 
by multiplying a factor of 0.04 times domestic food use. The utilized 
factor is a FSA estimate equal to the minimum allowable shrinkage used 
in calculating a handler's obligation to export or crush additional 
peanuts as set forth in Section 359e(d)(2)(iv) of the 1938 Act. 
Excessive moisture and weight loss due to foreign material in delivered 
farmer stock peanuts were not considered since such factors are 
accounted for as inspection factors at buying points and do not impact 
quota marketing tonnage.
    The adjustment for Segregation 2 and 3 loan transfers represents 
transfer of Segregation 2 and 3 peanuts from additional price support 
loan pools to quota loan pools. Such transfers occur when quota peanut 
producers have insufficient Segregation 1 peanuts to fill their quotas 
yet have Segregation 2 and 3 peanuts in additional loan pools which 
would have been eligible to be pledged as collateral for price support 
at the quota loan rate, if it were not for quality problems. In such 
cases, for price support purposes only, these peanuts may be pledged as 
collateral for price support loans at a discounted quota loan rate. 
Subject to a national limit of 5,000 st, individual producers can 
transfer up to 25 percent of their effective farm poundage quota from 
the additional loan pool and receive 70 percent of the quota loan rate. 
Regarding the disposition of such peanuts, the CCC will ensure that 
they are crushed for oil.
    In addition, an allowance has been made for underproduction. 
Historically, only 92 percent of the quota has been marketed. Since the 
1996 Act eliminated the carryover of unmarketed quota pounds, any quota 
pounds not marketed will be a loss of potential income for producers. 
It is expected that somewhat more than 92 percent will be marketed. It 
was assumed, based on a

[[Page 48940]]

consideration of all factors, that 96.7 percent of the 1998 quota will 
be marketed. This assumption, together with expected growth in domestic 
consumption of peanut products through new uses and a small increase in 
demand because of lower peanut support prices resulted in the setting 
of a national peanut poundage quota of 1,167,000 st for the 1998 MY.
Discussion of Comments
    This determination followed the publication of a proposed rule on 
December 2, 1997, in the Federal Register (62 FR 63678), which proposed 
a MY 1998 national poundage quota level between 1,133,000 and 1,175,000 
st, an additional price support level between $132 per st to $175 per 
st, and a minimum CCC sales price for export edible peanuts for sales 
of price support loan peanuts for the 1998 crop between $350 and $400 
per st. There were 13 letters received comprising 19 separate comments 
in response to the notice during the comment period that ended on 
December 9, 1997. Comments were submitted by two consumer groups, five 
manufacturers' groups, two sheller and handler groups, two sheller and 
handler firms, and two producer organizations. Comments were received 
relative to quota levels, the additional price support level and the 
minimum CCC sales price for additional peanuts. In reference to quota 
levels, the consumer and manufacturer groups were concerned with 
adequate supplies, stock levels, and all suggested that the quota be 
set above the recommended range. The sheller association and the buying 
point association recommended the quota be set at the upper end or 
above the proposed range. The sheller and the handler recommended no 
change. The producer groups recommended no change to not more than 2.5 
percent increase.
    A larger quota requested by consumer and manufacturer groups would 
have minimal benefit for consumers of peanut products or the peanut 
industry. At this time, Bureau of Labor Statistics data for peanut 
butter does not make the case that lower quota support prices since the 
1996 Act have been passed on to consumers. Also, industry sources point 
out that infrastructure is unevenly distributed across the production 
belt and that competition among handlers and shellers for grower 
loyalty keeps prices bid for farmer stock peanuts above the quota 
support level. Since increases in demand for greater supplies of 
peanuts is normally small, a quota of 1,250,000 st, as suggested by 
some commentators, would likely result in a surplus and a loss on loan 
placements for more than 80,000 st of peanuts. These peanut losses 
would be around $400 per st. Losses of up to $20 million could occur 
and result in producer assessments ranging from $15 to $20 per st the 
following year. For the above stated reasons a quota of 1,250,000 st 
would not be expected to impact consumer prices and would be expected 
to adversely affect producer income. In any event, the quota formula is 
set by statute and the determined quota was calculated using that 
formula.

B. Additional Peanut Support Level

    Section 155(b)(2) of the 1996 Act provides that price support shall 
be made available for additional peanuts at such level as the Secretary 
determines will ensure no losses to CCC from the sale or disposal of 
such peanuts, taking into consideration the demand for peanut oil and 
peanut meal, expected prices of other vegetable oils and protein meals, 
and the demand for peanuts in foreign markets.
    The MY 1998 price support level for additional peanuts was 
announced at $175 per st on February 13, 1998. The national average 
price support rate for quota peanuts, for each of the 1996 through 2002 
crops, is set at $610 per st by the 1996 Act and is codified at 7 CFR 
1446.103.
    The MY 1998 price support level for additional peanuts was 
established at $175 per st to ensure no losses to CCC from the sale or 
disposal of additional peanuts. Peanuts are pledged as collateral for 
price support loans. The peanuts are then sold in order to recoup the 
loan principal, interest and related costs. The statutory factors have 
been analyzed as set out below. Based on those factors, it is 
anticipated that while the current oil market is strong, there is 
enough uncertainty in the market to suggest caution.
    In making this determination, the following market information was 
considered:
    1. The domestic use of peanut oil during MY 1998 is forecast to be 
105,000 st, up 2 percent from MY 1997 projected domestic use. MY 1998 
peanut oil beginning stocks are expected to be 27,500 st, down 36 
percent from MY 1997. The MY 1998 average peanut oil price is expected 
to be $0.413 per pound, down $0.017 per pound from MY 1997.
    2. The domestic use of peanut meal during MY 1998 is forecast to be 
150,000 st, up 20,000 st from MY 1997 projected domestic use. MY 1998 
peanut meal beginning stocks are expected to be 4,000 st, unchanged 
from MY 1997. The MY 1998 average peanut meal price is expected to be 
$147.50 per st, down $22.50 per st from MY 1997.
    3. The domestic disappearance of soybean oil during MY 1998 is 
forecast to be 7,300,000 st, up 1.7 percent from projected MY 1997 
domestic disappearance. MY 1998 soybean oil beginning stocks are 
expected to be 777,500 st, up about 2.3 percent from MY 1997. The MY 
1998 average soybean oil price is expected to be $0.248 per pound, down 
$0.002 per pound from MY 1997.
    4. The domestic disappearance of cottonseed oil during MY 1998 is 
forecast to be 515,500 st, up 0.5 percent from projected MY 1997 
domestic disappearance. MY 1998 cottonseed oil beginning stocks are 
expected to be 40,500 st, up 22.7 percent from MY 1997. The MY 1998 
average cottonseed oil price is expected to be $0.270 per pound, down 
$0.0075 per pound from MY 1997.
    5. The domestic disappearance of soybean meal during MY 1998 is 
forecast to be 29,250,000 st, up 3.5 percent from projected MY 1997 
domestic disappearance. MY 1998 soybean meal beginning stocks are 
expected to be 225,000 st, up about 8.7 percent from MY 1997. The MY 
1997 average soybean meal price is expected to be $182.50 per st, down 
$30.00 per st from MY 1997.
    6. The domestic disappearance of cottonseed meal during MY 1998 is 
forecast to be 1,640,000 st, down 0.3 percent from projected MY 1997 
domestic disappearance. MY 1998 cottonseed meal beginning stocks are 
expected to be 41,000 st, unchanged from MY 1997. The MY 1998 average 
cottonseed meal price is expected to be $135.00 per st, down $25 per st 
from MY 1997.
    7. The world use of peanuts for MY 1997 is expected to be 24.07 
million metric tons, down 8.0 percent from MY 1996. World peanut 
production for MY 1997 is forecast to be 24.58 million metric tons, 
down 7.8 percent from MY 1996. Ending stocks for MY 1997 are forecast 
at 0.51 million metric tons, up 4.5 percent from 1996.
    MY 1997 begins with record oil stocks and record imports of oil 
during MY 1996. Yet MY 1998 peanut oil prices are projected to be 41.3 
cents per pound. Based on the supply and use situation at the beginning 
of MY 1997 and projections for MY 1998, there are conflicting signals 
in the supply price relationship in the peanut oil market that suggest 
caution in setting the additional peanut support level. Also, producers 
are expected to place about 10,000 st of quota peanuts and 140,000 st 
of additional peanuts under price

[[Page 48941]]

support loan. The accompanying table shows loan outlays under three 
additional price support levels and receipts under three bid price 
(price offer) levels.

        Estimated Peanut Program Outlays and Receipts for MY 1998
                             [FSA/TPD 12/97]
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Loans Made: \1\
    Quota........................  ...........  ...........    10,000 st
    Additional...................  ...........  ...........   140,000 st
Loan Rate: \2\
    Quota........................      $610/st      $610/st      $610/st
    Additional...................      $132/st      $150/st      $175/st
                                  --------------------------------------
             Outlays                          Million Dollars
                                  --------------------------------------
MY 98............................           28           31           34
                                  --------------------------------------
                                             Average Bid Price
                                  --------------------------------------
Item \3\.........................      $150/st      $250/st      $325/st
                                  --------------------------------------
             Receipts                         Million Dollars
                                  --------------------------------------
MY 98............................           23           38           49
Net Cost \1\.....................            0            0            0
------------------------------------------------------------------------
\1\ Assumed levels based on 1996/1997 and 1997/98 experiences.
\2\ Plus $25/st administrative expense.
\3\ Assumes quota and additional loan inventory sold as oil stock to
  show maximum monetary exposure of assumed loan receipts.
\4\ Program must operate at no-net-cost to treasury. Shortfalls are made
  up through grower assessments and pool dividends.

Discussion of Comments
    During the comment period that ended December 9, 1997, there were 
three comments received concerning the 1998 additional peanut price 
support level. One sheller association and one handler association made 
specific recommendations on the additional price support level. They 
recommended a range of $175 to $250 per st. The volume of additional 
peanuts being bought back and strong prices in the oil seed complex 
were cited as the reason to increase the additional price support 
level. The producer group recommended setting the additional support 
level within the proposed range. The final determination was made for 
the reasons given above. An analysis of the data for that year is 
available from the contact person listed above.

C. Announcement of CCC Sales Price for Additional Peanuts Sold for 
Export Edible Use

    The establishment of a minimum price at which 1998 crop additional 
peanuts owned or controlled by CCC may be sold for use as edible 
peanuts in export markets is a discretionary action. The announcement 
of that price provides producers and handlers with information to 
facilitate the negotiation of private contracts for the sale of 
additional peanuts for export.
    An overly high price may discourage private sales. If too low, the 
minimum price could have an unnecessary, adverse effect on prices paid 
to producers for additional peanuts. The minimum price at which 1998 
crop additional peanuts owned or controlled by CCC may be sold for use 
as edible peanuts in export markets was established at $400 per st on 
April 30, 1998. This price should encourage exports while providing 
price stability for additional peanuts sold under contract. It will 
also assure handlers that CCC will not undercut their export 
contracting efforts with offerings of additional peanuts for export 
edible sales below the announced minimum sales price.

Advance Notice of Proposed Rule Making

    An Advance Notice of Proposed Rulemaking was published in the 
Federal Register on August 18, 1997 (62 FR 43955) requesting comments 
on the method for determining the minimum CCC export edible sales price 
for additional peanuts. Ten letters containing 10 comments were 
received during the comment period ending September 30, 1997. Seven 
comments were from producer groups, two from sheller groups and one 
from an individual sheller. The seven producer groups recommended no 
change from the $400 per st level. One sheller group recommended 
setting an absolute dollar figure each year and ranging between $350 to 
$375 per st for 1998. One sheller group and one sheller submitted a 
formula based on the peanut oil market.

Proposed Rule

    Three letters containing three separate comments concerning the 
minimum CCC sales price for additional peanuts sold for export edible 
use were received during the comment period for the Proposed Rule 
ending December 9, 1997. One sheller group, one handler group, and one 
grower group made specific comments concerning the sales policy.
    One sheller group resubmitted its proposed formula tied to the 
peanut oil market to set the minimum CCC export edible sales price for 
additional peanuts. The handler group and a producer group recommended 
setting the price at an fixed level. The handler group suggested a 
range of $350 to $400 per st. The producer group wanted the price to 
remain at $400 per st. The final price was set based on the factors set 
forth above.

List of Subjects

7 CFR Part 729

    Peanuts, Penalties, Poundage quotas, Reporting and record keeping 
requirements.

7 CFR Part 1446

    Loan program--Agriculture, Peanuts, Price support programs, 
Reporting and recordkeeping requirements, Warehouses.

    Accordingly, this final rule amends 7 CFR parts 729 and 1446 as 
follows:

[[Page 48942]]

PART 729--PEANUTS

    1. The authority citation for 7 CFR part 729 continues to read as 
follows:

    Authority: 7 U.S.C. 1301, 1357 et seq., 1372, 1373, 1375, and 
7271.

    2. Section 729.216 paragraph (c) is revised to read as follows:


Sec. 729.216  National poundage quota.

* * * * *
    (c) Quota determination for individual marketing years (excluding 
seed):
    (1) The national poundage quota for quota peanuts for marketing 
year 1996 is 1,100,000 short tons.
    (2) The national poundage quota for quota peanuts for marketing 
year 1997 is 1,133,000 short tons.
    (3) The national poundage quota for quota peanuts for marketing 
year 1998 is 1,167,000 short tons.

PART 1446--PEANUTS

    3. The authority citation for 7 CFR part 1446 continues to read as 
follows:

    Authority: 7 U.S.C. 7271, 15 U.S.C. 714b and 714c.

    4. Section 1446.310 is amended by adding new paragraph (c) to read 
as follows:


Sec. 1446.310  Additional peanut support levels.

* * * * *
    (c ) The national support rate for additional peanuts for the 1998 
crop is $175 per short ton.
    5. Section 1446.311 is amended by adding new paragraph (c) to read 
as follows:


Sec. 1446.311  Minimum CCC sales price for certain peanuts.

    (c) The minimum CCC sales price for additional peanuts to be sold 
from the price support loan inventory for export edible use from the 
1998 and subsequent crops is $400 per short ton.

    Signed at Washington, DC, on August 31, 1999.
Keith Kelly,
Administrator, Farm Service Agency and Executive Vice President, 
Commodity Credit Corporation.
[FR Doc. 99-23377 Filed 9-8-99; 8:45 am]
BILLING CODE 3410-05-P