[Federal Register Volume 66, Number 242 (Monday, December 17, 2001)]
[Proposed Rules]
[Pages 64918-64924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-31038]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 66, No. 242 / Monday, December 17, 2001 / 
Proposed Rules  

[[Page 64918]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 81

[Docket No. FV01-81-01 PR]
RIN 0581-AC03


Regulations Governing the California Prune/Plum (Tree Removal) 
Diversion Program

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This proposed rule invites comments on procedures for a 
California Prune/Plum Diversion Program. The program is voluntary and 
would consist wholly of tree removal. The program would be implemented 
under clause (3) of Section 32 of the Act of August 24, 1935, as 
amended. The proposed program would help the California dried plum 
industry address its severe oversupply problems. The tree removal is 
expected to bring supplies into closer balance with market needs, and 
provide some relief to growers faced with excess supplies and acreage, 
and low prices.

DATES: Comments received by January 16, 2002, will be considered prior 
to issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this action. Comments must be sent to the Docket Clerk, 
Fruit and Vegetable Programs, AMS, USDA, P.O. Box 96456, Room 2525--
South Building, Washington, D.C. 20090-6456; Fax: (202) 720-8938; or E-
mail: [email protected]. Comments should reference the docket 
number and the date and page number of this issue of the Federal 
Register and will be available for public inspection in the Office of 
the Docket Clerk during regular business hours, or can be viewed at: 
http:/www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Anne M. Dec, Marketing Order 
Administration Branch, at the above address; Telephone: 202-720-2491; 
Fax: 202-720-8938; or E-mail: [email protected].
    Small businesses may request information on the diversion program 
by contacting Jay Guerber at the above address, telephone, fax, or E-
mail: [email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This proposed rule has been determined to be significant for the 
purposes of Executive Order 12866 and therefore has been reviewed by 
the Office of Management and Budget (OMB). In accordance with Executive 
Order 12866, the Department of Agriculture (USDA) has prepared a 
regulatory cost-benefit assessment and a civil rights impact analysis. 
These documents can be obtained by contacting the person listed in the 
For Further Information Contact section of this proposed rule.

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State and local governments and 
the private sector. Under section 202 of the UMRA, the Agricultural 
Marketing Service (AMS) generally must prepare a written statement, 
including a cost-benefit analysis, for proposed and final rules with 
``Federal mandates'' that may result in expenditures by State and local 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, Section 205 of the UMRA generally requires the AMS to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective, or least burdensome alternative 
that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State and local governments or 
the private sector of $100 million or more in any one year. Therefore, 
this rule is not subject to the requirements of Sections 202 and 205 of 
the UMRA.

Executive Order 12988

    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. The rule is intended to have preemptive effect 
with respect to any State or local laws, regulations or policies which 
conflict with its provisions, or which would otherwise impede its full 
implementation. Prior to any judicial challenge to the provisions of 
this rule or the application of its provisions, all applicable 
administrative procedures must be exhausted.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35), the reporting and recordkeeping provisions that would be 
generated by this proposed rule will be submitted to the Office of 
Management and Budget (OMB).
    Two forms are needed for the administration of the tree removal 
program. Growers who wish to participate in the program would have to 
submit an ``Application for Prune Tree Removal Program.'' We estimate 
that 200 growers may submit an application, and that each form would 
take about 30 minutes to complete, for a total burden of 100 hours. 
After removing their trees, growers will then have to sign a statement 
stating they wish payment. No additional burden has been estimated for 
this second form which would require only a signature. Finally, 
participants will be required to retain records pertaining to the tree 
removal program for two years after the year of removal.

Executive Order 12372

    This program is not subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials. See the Notice related to 7 CFR part 3015, subpart V 
published at 48 FR 29115 (June 24, 1983).

Executive Order 12612

    It has been determined that this rule does not have sufficient 
Federalism implications to warrant the preparation of a Federalism 
Assessment. The provisions contained in this rule will not have a 
substantial direct effect on States or their political subdivisions or 
on the distribution of power and responsibilities among the various 
levels of government.

[[Page 64919]]

Authority for Tree Removal Program

    The proposed program is intended to reestablish prune/plum farmers' 
purchasing power. Programs to reestablish farmers' purchasing power are 
authorized by clause (3) of Section 32 of the Act of August 24, 1935, 
as amended (7 U.S.C. 612c)(``Section 32''). This clause of Section 32 
authorizes USDA to ``* * * reestablish farmers'' purchasing power by 
making payments in connection with the normal production of any 
agricultural commodity for domestic consumption.'' Section 32 also 
authorizes USDA to use Section 32 funds ``* * * at such times, and in 
such manner, and in such amounts, as USDA finds will effectuate 
substantial accomplishments of any one or more of the purposes of this 
section.'' Furthermore, ``Determinations by USDA as to what constitutes 
* * * normal production for domestic consumption shall be final.''

Need for the Tree Removal Program

    Production of prune/plums for marketing as dried plums is 
concentrated in California. Production of dried plums during the 2000 
season increased for the second consecutive year, to nearly 219,000 
tons (natural condition).
    Changes in growing conditions have substantially altered the 
production outlook for 2001. Production was originally estimated to be 
220,000 tons. However, due to a lighter crop-set in major producing 
areas, as well as freezing temperatures and hail, production for the 
2001 crop year is now estimated at about 155,000 tons. This smaller 
crop somewhat alleviates the oversupply situation, but does not 
represent a change in the longer-term oversupply situation.
    When the crop was estimated at 220,000 tons in the spring of 2001, 
the industry discussed the use of volume control authorized under the 
Federal marketing order. In addition, carryin inventories from the 2000 
crop year were reported at 100,829 tons. With this level of inventories 
and crop, the total available supply would have been 320,829 tons.
    With this estimated crop size, establishing a 48 percent reserve 
(52 percent free tonnage) was discussed. The industry does not have a 
history of establishing reserve percentages, and reserve percentages 
were last used in the 1970's. The fact that the marketing order 
committee even considered use of the reserve provision indicates the 
gravity with which the industry views the oversupply problem. The use 
of marketing order reserve provisions is intended to help industries 
deal with surplus production and facilitate orderly marketing of their 
crops.
    The Prune Bargaining Association (PBA) represents about 40 percent 
of the independent growers and negotiates a selling price for its 
members. With the large anticipated crop for the 2001 season and the 
large carryin inventory, the PBA had difficulty establishing a price 
with handlers. Even with the smaller crop of 155,000 tons, the PBA 
could only negotiate a price of $763 per ton. This compares to $845 for 
the 2000 season, or a decrease of 9.7 percent. Although the price has 
been set, not all handlers have signed the agreement. Even this lower 
price may be too high in the eyes of the non-signing handlers, given 
current supply conditions.
    The smaller crop size for 2001 has provided the industry some 
relief in reducing total available supplies. However, there are still a 
large number of nonbearing acres (15,000) that will become productive 
over the next six years. In addition, there are many acres with older, 
less productive trees which could be replanted in the near future. A 
tree removal program would assist growers who are facing difficult 
replanting decisions by allowing them to receive funds for the removal 
of trees and, at the same time, prohibit those growers from replanting 
prune/plums in those orchards. Prune/plum growers also tend to be 
producers of almonds, walnuts, and cling peaches. Plantings of these 
crops could increase in future years as growers remove prune/plum 
acreage.
    Bearing acreage expanded to a record 86,000 acres during the 2000 
season and the average yield increased 19 percent. Yields are 
anticipated to increase further as more densely planted acres become 
productive over the next several years.
    Nonbearing acreage, which is an indicator of future production 
levels, increased to an all-time high of 26,000 acres in 1998. This 
represented a 22-percent increase in the productive capacity of the 
industry. The non-bearing acres are more densely planted than in 
previous years which results in a higher yield per acre.
    The dried plum industry faces a long-run surplus situation. For the 
2000 crop year, bearing acres were 86,000 and non-bearing acres were 
15,000. Bearing acres could exceed 100,000 in the near future. With 
yields in excess of 2.0 tons per acre, production could be expected to 
be above 200,000 tons in many crop years.
    Total domestic shipments exceeded 100,000 tons for six seasons in 
the late 1980's and early 1990's, but have declined from a high of 
108,085 processed tons in 1996. Per capita consumption has been 
steadily declining since 1980. Export shipments have been stagnant. As 
a result of these domestic and export trends, total shipments have 
never exceeded 190,000 processed tons.
    Until recently, export shipments were a source of growth in the 
dried plum industry. In 2000, exports represented 47 percent of total 
shipments. However, the strong dollar and the downturn in the economies 
in Asia and Europe have significantly slowed export sales.
    Due to the significant supply-demand imbalance, the industry 
anticipates several years in which the expected annual carryin 
inventories will exceed the industry's desirable carryin level of 
approximately 40,000 tons. If dried plum markets continue to be over-
supplied with product, grower prices and grower relations with packers 
will deteriorate significantly. Even with the lower production estimate 
for the 2001 crop year, the carryout inventory is expected to exceed 
76,000 tons.
    High prices from 1992 through 1995, and a more balanced supply and 
demand situation, helped to stimulate investments in new acreage. This 
additional acreage came from a variety of sources, mainly rice and 
pasture land. Intensifying the anticipated surplus situation is the 
fact that new acres are more productive than existing acres, which 
causes output to grow more rapidly in proportion to acreage growth.
    It takes dried plum trees 6 years to become fully productive. Many 
of the costs of producing plum trees are ``sunk,'' making it difficult 
to reverse decisions once those acres are planted. Because supply is 
slow to adjust to changing market conditions, the industry anticipates 
many years of production outpacing demand, resulting in continued 
distressed grower conditions.
    From 1980 through 2000, the total cost per ton of producing dried 
plums exceeded the growers' season-average prices. Similarly, the total 
cost per acre exceeded revenue per acre.
    However, it is also important to consider variable cost. In recent 
years, the total revenue per ton and per acre has been greater than the 
total variable cost per ton and per acre. Prices and revenues greater 
than variable costs provide some indication of why a dried plum 
producer continues to harvest and process a crop despite losing money.

Tree Removal Diversion Program

    The industry is requesting a voluntary tree removal program 
estimated to cost $17 million. The industry would like to

[[Page 64920]]

remove a minimum of 20,000 bearing acres of prune/plum trees. With many 
of the current bearing acres reaching the age where replanting would be 
considered, the industry is trying to provide an incentive to growers 
to remove older trees, while ensuring that those orchards are not 
replanted with prune/plum trees.
    To be eligible for the proposed tree removal program, orchards must 
have a minimum yield of 1.5 tons per acre. With a minimum threshold 
yield of 1.5 tons per acre, sufficient land would be enrolled in the 
tree removal program to reduce annual production by approximately 
30,000 tons.
    The industry has estimated that it will take $8 to $9 per tree to 
induce growers to participate in such a program. It is believed that 
financial institutions that provide growers operating funds would not 
allow them to participate if the payment per tree is below this level.
    This type of one-time decrease in production would more closely 
align supply with demand, while assuring an adequate supply. This would 
allow the industry to concentrate their efforts on rebuilding demand 
for future years.
    The industry has already undertaken an initial smaller-scale tree 
removal program. However, to finance this grower-initiated tree pull 
program, grower assessments for promotion were reduced from $50 per ton 
to $30 per ton. Less money is available for promotion, but growers felt 
that this re-direction of funds was necessary to help redress the 
oversupply situation.
    The tree removal program would be administered through the 
Agricultural Marketing Service (AMS) and the Prune Marketing Committee 
(Committee). The Committee is an administrative agency appointed by AMS 
to locally administer the terms of Federal Marketing Order No. 993.
    Any prune/plum producer wishing to participate in the program would 
file an application with the Committee. The application period would 
begin 15 days after publication of the program announcement and last 
for 30 days.
    Each applicant would provide information needed by the Committee to 
operate the program. This would include, for example, the number of 
trees the applicant wished to remove and their location. The applicant 
would have to certify that he/she has not contracted to sell the land 
or otherwise already arranged to have the trees removed. The Committee 
would review each application for completeness, and would make 
reasonable efforts to contact growers to obtain any missing 
information.
    In order to be eligible to participate in the program, the orchards 
or blocks of trees being removed from production would have to have a 
minimum yield of 1.5 tons per net planted acre during both the 1999 and 
2000 crop years. A net planted acre is the actual acreage planted with 
prune/plum trees. This would mean that abandoned orchards would not be 
eligible for participation. The Department considered establishing the 
minimum qualifying yield at 2.2 tons per acre, but determined that at 
that level, too many orchards would be ineligible for the program.
    USDA has allocated $17 million for this program, including 
administrative costs. Applications would be approved until the level of 
available funding was reached. Each participating grower would have to 
then remove trees from production by June 30, 2002. Growers would be 
paid $8.50 for each eligible tree removed. This level of payment is 
deemed necessary for a significant number of growers to participate in 
the tree-removal program. It would cover most of the costs of removing 
the trees (bulldozing, cutting, etc.), and preparing the land for other 
uses. The costs vary depending on the number of acres removed. Some 
cost savings may accrue with larger acreage removals.
    Estimated costs for removing, piling, chipping, or other disposal 
methods range from $142-$225 per acre or from $1.29-$2.05 per tree. 
Costs for removing the roots and other debris are expected to range 
from $163-$289 per acre or from $1.48-$2.63 per tree. Leveling of the 
ground is expected to cost $161-$401 per acre or $1.46-$3.65 per tree. 
Fumigation of the tree holes is expected to cost $550 per acre or $5.00 
per tree. This would amount to $9.23-$13.33 for each tree removed. The 
$8.50 payment proposed under the program is expected to offset most of 
the grower's costs.
    Each grower participating in the program would have to agree not to 
replant prune/plum trees on land cleared under this program through 
June 30, 2004. Because it takes new acres at least six years to be 
productive, acreage participating in the tree-removal program would not 
return to commercial prune/plum production for at least eight years and 
possibly nine years because plantings occur in January and February. 
Alternative crops could be planted. Additionally, the current economic 
conditions in the industry, specifically weak demand, reduced per 
capita consumption, stagnant domestic shipments and exports, and 
declining grower prices and revenues, would appear to limit the 
incentives for replanting acreage to prune/plum trees.

Initial 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 rule 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 actions in order that small businesses will not be 
unduly or disproportionately burdened.
    There are approximately 1,250 producers of dried plums in 
California. Small agricultural producers have been defined by the Small 
Business Administration (13 CFR 121.201) as those having annual 
receipts of less than $750,000. An estimated 32 producers, or less than 
13 percent of the 1,250 total producers, would be considered large 
producers with annual incomes over $750,000.
    This proposed rule would establish a tree removal program diversion 
program for California dried prune/plums. Authority for the program is 
provided in clause (3) of Section 32 of the act of August 24, 1935, as 
amended.
    Participation in the diversion program is strictly voluntary, so 
individual producers, both small and large, can weigh the benefits and 
costs for their own operations before deciding whether to participate 
in the program.

Economic Assessment of the Tree Removal Diversion Program

    To assess the impact a tree removal program would have on prices 
growers receive for their product, impacts on grower prices and 
inventories with a tree removal program and without a tree removal 
program were estimated. An econometric model was estimated for the 
purpose of estimating nominal season average grower prices under both 
scenarios.
    A tree removal program will directly reduce the number of bearing 
acres, but there will not be an impact until the 2002 crop year since 
harvesting of the 2001 crop is completed.
    In 2000, there were still 15,000 non-bearing acres. The industry 
has indicated that no additional plantings of prune/plum trees for 
acreage expansion are occurring at this time. Therefore, after the 
15,000 non-bearing acres come into production, the productive capacity 
of the industry is assumed to stay constant.
    The tree removal analysis assumes that 20,000 acres are removed 
through the tree removal program, while 3,000 of the non-bearing acres 
become productive in 2002. This results in

[[Page 64921]]

bearing acres being reduced from 86,000 in 2001 to 69,000 in 2002. 
Bearing acres increase by 3000 acres in each of the subsequent years 
until 2007, rising to 72,000 in 2003, 75,000 in 2004, 78,000 in 2005, 
and 81,000 in 2006 and 2007.
    Production for the 2001 crop year is currently estimated by the 
Department's National Agricultural Statistics Service (NASS) at 155,000 
natural condition tons. Marketable production is generally 93 percent 
of total production, yielding an estimated 144,500 marketable tons for 
2001. Carryin inventory for the 2001 crop year was computed by the 
marketing order committee at 100,829 tons as of June 30, 2001. These 
figures are used to derive an estimated total available supply of 
244,979 tons for 2001. This level of supply accounts for the fact that 
a number of voluntary measures have been taken by the industry to 
reduce the level of production for the 2001 crop year, including crop 
abandonment and cutbacks on cultural practices.
    Shipments are estimated to grow by 1 percent annually, which 
results in estimated total shipments of 165,932 tons for 2001. The one 
percent growth in shipments reflects decreased government surplus 
purchases and possible retail price effects.
    For 2002, total shipments are estimated at 165,932 tons and the 
carryin inventory is estimated at 79,047 tons. With the tree removal 
diversion program reducing bearing acres to 69,000 for the 2002 crop 
year, total available supply is estimated at 256,900 tons. It should be 
noted that through 2001, carryin inventory does not exactly match the 
prior year's difference between total available supply and total 
shipments. This is due to shrinkage and other minor adjustments 
computed by the Federal marketing order committee. However, for this 
analysis, the estimated carryin from 2002 to 2007 is estimated to be 
the exact difference between estimated total supply and estimated 
shipments from the prior year.
    The analysis also assumes that yields will fluctuate up and down, 
in keeping with the known ``alternate bearing'' tendency of prune/plum 
trees. Estimated production, computed by multiplying acreage times 
yield, fluctuates accordingly.
    As carryin inventories are reduced, the total available supply 
moderates for crop years 2003 through 2007, relative to the situation 
without a tree removal program. This results in season average grower 
prices ranging from $845 to $1,084 during that same time span. It 
should be noted that the margin of error for these estimates becomes 
very large for future crop years.
    Even though season-average grower prices per ton rise under the 
tree removal program, all product produced is not necessarily of 
marketable quantity. Costs are incurred on all the production, but 
revenue is received only on product actually marketed. Thus, the 
economic effect of the tree removal program on a per acre basis is to 
dramatically reduce losses and bring producer returns closer to a 
break-even level. With losses still being incurred by producers, there 
should be only a limited incentive to further expand production as a 
result of the tree removal program. It will remain for growers to 
control costs and to expand demand to ensure their longer-term economic 
stability.
    Grower prices are a small component of the finished dried plum 
product and are not closely associated with movements in retail prices. 
However, the increases in grower prices estimated for crop years 2003 
through 2007 may have an impact on retail prices. The extent of any 
retail price increases would depend on processor and retailer margins 
and the pricing and availability of substitute products, such as 
raisins or other dried fruits. It should be noted that dried plum 
prices are estimated to increase with or without a tree removal 
program, but the magnitude of the grower price increase is greater with 
the program.
    Without a tree removal program, bearing acres are estimated to 
increase to 89,000 by the 2002 crop year. Production would be in excess 
of 200,000 tons, resulting in carryout inventories in excess of 100,000 
tons in 2003. In addition, under this scenario, 2002 grower prices are 
estimated at $789 per ton. With high inventories and low grower prices, 
market forces are assumed to induce growers to remove less productive 
acres and the number of bearing acres is estimated to decline from 
89,000 in 2002 to 84,000 in 2007. Even with the decline in bearing 
acres, production and inventories remain excessive from 2002 through 
2007. However, in 2007, carryout inventories fall to an estimated 6,592 
tons.
    Under both scenarios, grower prices increase and inventories become 
more manageable. The difference is that, under a tree removal program, 
adjustments to inventories and prices occur more rapidly. This would 
accelerate benefits to growers, who would otherwise be struggling to 
break even in a depressed market, until market forces brought about a 
slow correction.
    In addition to the direct impact on growers' prices and revenues 
that a tree removal program would have, there are also indirect 
impacts. A tree removal program assists in decreasing burdensome 
(undesirable) carryout inventories. Without a tree removal program, 
large quantities of dried plums held in packers' inventories prevent 
grower pools from being closed, which delays grower payments. Large 
amounts of undesirable inventory lead to strained grower-packer 
relations. In an attempt to sell the excessive inventories, packers 
reduce f.o.b. prices, which in turn leads to market share battles and 
lower prices being passed back to producers. A more balanced supply and 
demand situation allows growers and packers to jointly continue 
developing markets in ways that benefit the entire industry.

Industry Self-Help Initiatives

    The California dried plum industry has undertaken an initiative to 
reduce acreage and production. The industry implemented a pre-harvest 
tree removal program during the 2001 crop year. The industry collected 
about $3 million to support this effort by reducing assessments under 
their California State marketing order from $50 to $30 a ton. The $20 
per ton reduced assessment was used to support the industry tree 
removal program.
    The program was successful in removing about 3,500 acres. The 
effects of this industry self-help diversion are included in the 
analysis of the Federal program.
    The industry also has taken measures to stimulate demand, 
including: (1) The development of new products and new uses for dried 
plums; (2) marketing efforts to attract younger customers; and (3) 
domestic and export market promotion programs under the California 
State marketing order and the Foreign Agricultural Service's Marketing 
Assistance Program (MAP). One of the most recent initiatives involved 
securing approval from the Food and Drug Administration to change the 
name ``dried prunes'' to ``dried plums.'' This has allowed the industry 
to redirect its generic marketing efforts to attract a new generation 
of consumers.

Benefits of the Program

    The economic assessment of the tree removal program indicates that 
it is expected to benefit producers, particularly small, under-
capitalized producers, as well as the entire dried plum industry, 
including packers. The per ton sales price is projected to increase 
from 2002-2007, reducing losses and moving producer returns closer to 
break-even levels. The benefit to producers from reduced losses is 
projected to total approximately $128

[[Page 64922]]

million over the six-year period 2002-2007. The benefits over the six-
year period would average nearly $24 million annually.

Costs of the Program

    The major cost of the program would be the payment to producers for 
removing their prune/plum trees. A total of $17 million, less Committee 
administrative costs, is available for the tree removal program. 
Committee administrative costs for reviewing applications and verifying 
tree removals are expected to be about $125,000. Major expense 
categories for administration include costs for salaries and benefits; 
vehicle rental and maintenance; insurance and overhead, and supplies.
    Total producer costs associated with filing applications to 
participate in the program and maintaining records for the period 
specified after tree removal are expected to be about $1,000.

Overall Assessment

    Payments made through this program could help prune/plum producers 
by addressing the oversupply problem that is adversely affecting the 
dried plum industry. A tree removal program is expected to allow supply 
to be adjusted downward more quickly. Market forces will also result in 
supplies being reduced, but this adjustment may occur more slowly, 
likely resulting in a number of farm failures. The tree-removal program 
may be beneficial in reducing the risk of loan default for lenders that 
financed prune/plum growers. This program will likely help small, 
under-capitalized producers to stay in business. These producers are 
often efficient, but do not have adequate resources to continue to 
operate given the current depressed conditions within their industry.
    Reducing the level of unprofitability also should provide 
opportunities for the industry to engage in additional demand-enhancing 
activities, especially directed at the domestic market. Even a moderate 
increase in domestic per capita consumption will have a significant, 
positive impact on grower returns.
    Costs for the program would include the $17 million to be paid 
growers and to the Committee for administration costs under the Federal 
tree removal diversion program. Additionally, growers would incur costs 
totaling $1,000 to comply with the filing and record-keeping 
requirements of the program.
    Benefits to growers under the tree removal program could total 
approximately $93 million. The first step in this calculation is to 
multiply marketable production for each of the six years (2002-2007) 
times the difference between grower price and variable cost, and to sum 
those figures. This is done for each of the two scenarios (with and 
without a tree pull program). The $93 million difference between those 
figures represents a conservative (low-end) estimate of program 
benefits resulting from reduced grower losses. This cost calculation 
assumes that the acreage on which trees are removed remain idle, and 
that growers must therefore absorb all fixed costs on that acreage. To 
the extent that the land is put to other productive uses, growers would 
not be absorbing all fixed costs of producing prune/plums, and grower 
benefits would be higher.
    If growers are earning more, it follows that processors and/or 
retailers beyond the farmgate would pay higher raw product costs to 
obtain the prune/plums from the growers. These higher costs could be 
passed on to consumers through higher retail prices or could be 
absorbed as reduced operating margins for other affected sectors of the 
economy--processors, wholesalers, or retailers. An estimate of these 
costs is obtained by multiplying the estimated grower price changes 
over each of the six years (2002-2007) times annual shipments (an 
average of the prune/plum shipments with the tree pull program and 
without the tree pull program). That figure, summed over the six years, 
is approximately $68 million. However, this $68 million cost is likely 
overstated due to the fact that grower prices are currently less than 
the cost of production. Adjustments in retail prices, and retailer and 
processor margins, are anticipated to change with or without a tree 
removal program.
    Another cost of the tree removal program is the reduced economic 
activity due to the growers purchasing fewer inputs (labor, chemicals, 
etc.) from the reduction in prune/plum acres managed and harvested. 
Input producers (laborers and agricultural chemical firms) would see 
less revenue because of lowered purchases of these inputs. To the 
extent that acreage removed is replanted in other crops, those costs 
could be somewhat offset by purchases of inputs to produce the 
alternative crops. This cost of the tree removal program is difficult 
to quantify and is not included in this analysis.
    Savings over the same period of up to $60 million could be realized 
through reduced surplus removal purchases of dried plum products for 
Federal feeding programs. These government savings would be used to 
purchase other commodities for use in school and other food assistance 
programs.
    Historically, the dried plum industry has not relied heavily on the 
Federal surplus removal program. Since the 1991 season, the industry 
has requested and received surplus removal purchases in only 4 of the 
past 11 seasons. Should the tree removal program be implemented and 
supplies be reduced as expected, it would be unlikely that the dried 
plum industry would seek government assistance in the form of surplus 
removal purchases for several years to come.

Conclusion

    Based on this information, USDA has determined that there is a 
surplus of dried plums, and that reestablishment of producers' 
purchasing power would be encouraged by using Section 32 funds to 
reduce supplies under a Diversion Program for Dried Plums/Prunes 
consisting wholly of a tree-removal program. USDA has further 
determined that this program would be a long-term solution to the 
oversupply situation that exists in the California dried plum industry, 
and that it would provide relief to growers.

List of Subjects in 7 CFR Part 81

    Administrative practice and procedures, Agriculture, Prunes, 
Reporting and recordkeeping requirements, Surplus agricultural 
commodities.

    For the reasons set forth in the preamble, it is proposed that 
Title 7, Subtitle B, Chapter 1 be amended as follows:
    1. The authority citation for 7 CFR part 81 reads as follows:

    Authority: 7 U.S.C. 612c.

    1. In Subtitle B, Chapter 1, Part 81 is added to read as follows:

PART 81--PRUNE/DRIED PLUM DIVERSION PROGRAM

Sec.
81.1   Applicability.
81.2   Administration.
81.3   Definitions.
81.4   Length of program.
81.5   General requirements.
81.6   Rate of payment.
81.7   Eligibility for payment.
81.8   Application and approval for participation.
81.9   Inspection and certification of diversion.
81.10   Claim for payment.
81.11   Compliance with program provisions.
81.12   Inspection of premises.
81.13   Records and accounts.
81.14   Offset, assignment, and prompt payment.
81.15   Appeals.

[[Page 64923]]

81.16   Refunds; joint and several liability.
81.17   Death, incompetency or disappearance.

    Authority: 7 U.S.C. 612c.

PART 81--PRUNE/DRIED PLUM DIVERSION PROGRAM


Sec. 81.1  Applicability.

    Pursuant to the authority conferred by section 32 of the Act of 
August 24, 1935, as amended (7 U.S.C. 612c)(Section 32), the Secretary 
of Agriculture will make payment to California producers who divert 
prune/plums by removing trees on which the fruit is produced in 
accordance with the terms and conditions set forth in this part.


Sec. 81.2  Administration.

    The program will be administered under the general direction and 
supervision of the Deputy Administrator, Fruit and Vegetable Programs, 
Agricultural Marketing Service (AMS), United States Department of 
Agriculture (USDA), and will be implemented by the Prune Marketing 
Committee (Committee). The Committee, or its authorized 
representatives, does not have authority to modify or waive any of the 
provisions of this part.


Sec. 81.3  Definitions.

    (a) Application means ``Application for Prune Tree Removal 
Program.''
    (b) Diversion means the removal of prune-plum trees after approval 
of applications by the Committee through June 30, 2002.
    (c) Removal means that the prune-plum trees are no longer standing 
and capable of producing a crop. The producer can accomplish removal by 
any means the producer desires.
    (d) Producer means an individual, partnership, association, or 
corporation in the State of California who grows prune/plums that are 
dehydrated into dried plums for market.
    (e) Committee means the Prune Marketing Committee established by 
the Secretary of Agriculture to locally administer Federal Marketing 
Order No. 993 (7 CFR part 993), regulating the handling of dried prunes 
produced in California.


Sec. 81.4  Length of program.

    This program is implemented January 2, 2002, through June 30, 2004. 
Producers diverting prune/plums by removing prune-plum trees must 
complete the diversion no later than June 30, 2002.


Sec. 81.5  General requirements.

    (a) To be eligible for this program, during one of the last two 
seasons, the trees to be removed must have yielded at least 1.5 tons 
per net planted acre during the 1999 or 2000 crop year. A net planted 
acre is the actual acreage planted with prune-plum trees. Abandoned 
orchards and dead trees will not qualify. In new orchards diverted, 
qualifying trees must be at least 5 years of age (6th leaf), contain at 
least two scaffolds, and be capable of producing at least 1.5 tons per 
net planted acre. The block of trees for removal must be easily 
definable by separations from other blocks and contain at least 1,000 
eligible trees or comprise an entire orchard.
    (b) Any grower participating in this program must agree not to 
replant prune-plum trees on the land cleared under this program through 
June 30, 2004. Participants bear responsibility for ensuring that trees 
are not replanted, whether by themselves, or by successors to the land, 
or by others, until after June 30, 2004. If trees are replanted before 
June 30, 2004, by any persons, participants must refund any USDA 
payment, with interest, made in connection with this tree removal 
program.


Sec. 81.6  Rate of payment.

    (a) The rate of payment for each eligible prune-plum tree removed 
will be $8.50 per tree.
    (b) Payment under paragraph (a) of this section will be made after 
tree removal has been verified by the staff of the Committee.
    (c) The $8.50 per tree payment is intended to cover the costs of 
tree removal. USDA will make no other payment with respect to such 
removals. The producer will be responsible for arranging, requesting, 
and paying for the tree removal in the specified orchard blocks or 
orchard(s), as the case may be.


Sec. 81.7  Eligibility for payment.

    (a) If applications for payment do not exceed $17,000,000, less 
administration costs, payments will be made under this program to any 
producer of prune/plums who complies with the requirements in Sec. 81.8 
and all other terms and conditions in this part.
    (b) If applications for participation in the program authorized by 
this part exceed $17,000,000, less administration costs, the Committee 
will approve the applications (subject to the requirements in 
Sec. 81.8) in the order in which the completed applications are 
received in the Committee office. Applications received after total 
outlays exceed the amount of money available will be denied.


Sec. 81.8  Application and approval for participation.

    (a) Applications will be reviewed for program compliance and 
approved or disapproved by Committee office personnel.
    (b) Applications for participation in the Prune-Plum Diversion 
Program can be obtained from the Committee office at 3841 North Freeway 
Boulevard, Suite 120, Sacramento, California 95834; telephone (916) 
565-6235.
    (c) Any producer desiring to participate in the prune-plum 
diversion program must file an application with the Committee prior to 
January 31, 2002. The application shall be accompanied by a copy of any 
two of the following four documents: Plat Map from the County Hall of 
Records; Irrigation Tax Bill; County Property Tax Bill; or any other 
documents containing an Assessor's Parcel Number. Such application 
shall include at least the following information:
    (1) The name, address, telephone number and tax identification 
number/social security number of the producer;
    (2) The location and size of the production unit to be diverted;
    (3) The prune/plum production from the orchard or portion of the 
orchard to be diverted during the 1999-2000 and 2000-2001 seasons;
    (4) A statement that all persons with an equity interest in the 
prune/plums in the production unit to be diverted consent to the filing 
of the application. That is, the applicant has clear title to the 
property in question, or agreement to participate in the tree removal 
program from lien or mortgage holders, and/or land owners, lessors, or 
similar parties;
    (5) A statement that the applicant agrees to comply with all of the 
regulations established for the prune/plum diversion program;
    (6) The producer applicant shall sign the application certifying 
that the information contained in the application is true and correct;
    (7) The year that the unit of prune/plums was planted;
    (8) The handlers who received the prune/plums from the producer in 
the last two years.
    (d) After the Committee receives the producer applications, it 
shall review them to determine whether all the required information has 
been provided and that the information appears reliable.
    (e) If the number of trees to be removed in such applications,

[[Page 64924]]

multiplied by $8.50 per tree, exceeds the amount of funds available for 
the diversion program, each grower's application will be considered in 
the order in which they are received at the Committee office.
    (f) After the application reviews and confirmation of eligible 
trees are completed, the Committee shall notify the applicant, in 
writing, as to whether or not the application has been approved and the 
number of trees approved for payment after removal. If an application 
is not approved, the notification shall specify the reason(s) for 
disapproval.


Sec. 81.9  Inspection and certification of diversion.

    When the removal of the prune-plum trees is complete, the 
producer(s) will notify the Committee on a form provided by the 
Committee. The Committee will certify that the trees approved for 
removal from the block or orchard, as the case may be, have been 
removed, and notify AMS.


Sec. 81.10  Claim for payment.

    (a) To obtain payment for the trees removed, the producer must 
submit to the Committee by June 30, 2002, a completed form provided by 
the Committee. Such form shall include the Committee's certification 
that the qualifying trees from the blocks or orchards have been 
removed. AMS will then issue a check to the producer in the amount of 
$8.50 per eligible tree removed.


Sec. 81.11  Compliance with program provisions.

    If USDA or the Committee determines that any provision of this part 
have not been complied with by the producer, the producer will not be 
entitled to diversion payments in connection with tree removal. If a 
producer does not comply with the terms of this part, including the 
requirement specified in Sec. 80.5(b), the producer must refund any 
USDA payment made in connection with such tree removal, and will also 
be liable to USDA for any other damages incurred as a result of such 
failure. The Committee or USDA may deny any producer the right to 
participate in this program or the right to receive payments in 
connection with any diversion previously made under this program, or 
both, if the Committee or USDA determines that:
    (a) The producer has failed to properly remove the prune/plum trees 
from the applicable block or the whole orchard regardless of whether 
such failure was caused directly by the producer or by any other person 
or persons;
    (b) The producer has not acted in good faith in connection with any 
activity under this program; or
    (c) The producer has failed to discharge fully any obligation 
assumed by him or her under this program.


Sec. 81.12  Inspection of premises.

    The producer must permit authorized representatives of USDA or the 
Committee, at any reasonable time, to have access to their premises to 
inspect and examine the orchard block where trees were removed and 
records pertaining to the orchard to determine compliance with the 
provisions of this part.


Sec. 81.13  Records and accounts.

    (a) The producers participating in this program must keep accurate 
records and accounts showing the details relative to the prune/plum 
tree removal, including the contract entered into with the firm 
removing the trees, as well as the invoices.
    (b) The producers must permit authorized representatives of USDA, 
the Committee, and the General Accounting Office at any reasonable time 
to inspect, examine, and make copies of such records and accounts to 
determine compliance with provisions of this part. Such records and 
accounts must be retained for two years after the date of payment to 
the producer under the program, or for two years after the date of any 
audit of records by USDA, whichever is later.


Sec. 81.14  Offset, assignment, and prompt payment.

    (a) Any payment or portion thereof due any person under this part 
shall be allowed without regard to questions of title under State law, 
and without regard to any claim or lien against the crop proceeds 
thereof in favor of the producer or any other creditors except agencies 
of the U.S. Government.
    (b) Payments which are earned by a producer under this program may 
be assigned in the same manner as allowed under the provisions of 7 CFR 
part 1404.
    (c) Prompt payment interest will not be applicable.


Sec. 81.15  Appeals.

    Any producer who is dissatisfied with a determination made pursuant 
to this part may make a request for reconsideration or appeal of such 
determination.


Sec. 81.16  Refunds; joint and several liability.

    (a) In the event there is a failure to comply with any term, 
requirement, or condition for payment arising under the application of 
this part, and if any refund of a payment to AMS shall otherwise become 
due in connection with the application of this part, all payments made 
under this part to any producer shall be refunded to AMS together with 
interest.
    (b) All producers signing an application for payment as having an 
interest in such payment shall be jointly and severally liable for any 
refund, including related charges, that is determined to be due for any 
reason under the terms and conditions of the application of this part.
    (c) Interest shall be applicable to refunds required of any 
producer under this part if AMS determines that payments or other 
assistance were provided to a producer who was not eligible for such 
assistance. Such interest shall be charged at the rate of interest that 
the United States Treasury charges the Commodity Credit Corporation 
(CCC) for funds, as of the date AMS made benefits available. Such 
interest shall accrue from the date of repayment or the date interest 
increases as determined in accordance with applicable regulations. AMS 
may waive the accrual of interest if AMS determines that the cause of 
the erroneous determination was not due to any action of the producer.
    (d) Interest determined in accordance with paragraph (c) of this 
section may be waived on refunds required of the producer when there 
was no intentional noncompliance on the part of the producer, as 
determined by AMS.
    (e) Late payment interest shall be assessed on all refunds in 
accordance with the provisions of, and subject to the rates prescribed 
for those claims which are addressed in 7 CFR part 792.
    (f) Producers must refund to AMS any excess payments, as determined 
by AMS, with respect to such application.
    (g) In the event that a benefit under this part was provided as the 
result of erroneous information provided by the producer, the benefit 
must be repaid with any applicable interest.


Sec. 81.17  Death, incompetency, or disappearance.

    In the case of death, incompetency, disappearance, or dissolution 
of a prune/plum producer that is eligible to receive benefits in 
accordance with this part, such person or persons in the same manner as 
specified in 7 CFR part 707 for other payments and benefits may receive 
such benefits, as determined appropriate by AMS.

    Dated: December 12, 2001.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 01-31038 Filed 12-13-01; 9:44 am]
BILLING CODE 3410-02-P