[Federal Register Volume 67, Number 47 (Monday, March 11, 2002)]
[Proposed Rules]
[Pages 10848-10853]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-5686]


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

  Federal Register / Vol. 67, No. 47 / Monday, March 11, 2002 / 
Proposed Rules  

[[Page 10848]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV-02-985-1 PR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2002-2003 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule would establish the quantity of spearmint oil 
produced in the Far West, by class, that handlers may purchase from, or 
handle for, producers during the 2002-2003 marketing year, which begins 
on June 1, 2002. This rule invites comments on the establishment of 
salable quantities and allotment percentages for Class 1 (Scotch) 
spearmint oil of 849,471 and 45 percent, respectively, and for Class 3 
(Native) spearmint oil of 800,761 and 38 percent, respectively. The 
Spearmint Oil Administrative Committee (Committee), the agency 
responsible for local administration of the marketing order for 
spearmint oil produced in the Far West, recommended this rule for the 
purpose of avoiding extreme fluctuations in supplies and prices, to 
help maintain stability in the spearmint oil market.

DATES: Comments must be received by March 26, 2002.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent to the Docket 
Clerk, Marketing Order Administration Branch, Fruit and Vegetable 
Programs, AMS, USDA, 1400 Independence Avenue SW., STOP 0237, 
Washington, DC 20250-0237; Fax: (202) 720-8938; 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, or can be viewed at: 
http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 1220 SW Third Avenue, suite 385, 
Portland, Oregon 97204; telephone: (503) 326-2724; Fax: (503) 326-7440; 
or George Kelhart, Technical Advisor, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW., STOP 0237, Washington, DC 20250-0237; telephone: (202) 
720-2491; Fax: (202) 720-8938.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone (202) 720-
2491, Fax: (202) 720-8938, or E-mail: [email protected].

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Order No. 985 (7 CFR part 985), as amended, regulating the handling of 
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and 
designated parts of Nevada and Utah), hereinafter referred to as the 
``order.'' This order is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. Under the provisions of the order now in effect, 
salable quantities and allotment percentages may be established for 
classes of spearmint oil produced in the Far West. This proposed rule 
would establish the quantity of spearmint oil produced in the Far West, 
by class, that may be purchased from or handled for producers by 
handlers during the 2002-2003 marketing year, which begins on June 1, 
2002. This proposed rule would 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 USDA 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 USDA 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 USDA's ruling on the petition, 
provided an action is filed not later than 20 days after the date of 
the entry of the ruling.
    Pursuant to authority in Secs. 985.50, 985.51, and 985.52 of the 
order, the Committee recommended the salable quantities and allotment 
percentages for the 2002-2003 marketing year at its October 3, 2001, 
meeting. For Scotch spearmint oil, in a vote of six in favor, one 
opposed, and one abstention, the Committee recommended the 
establishment of a salable quantity and allotment percentage of 849,471 
pounds and 45 percent, respectively. For Native spearmint oil, in a 
vote of seven in favor and one opposed, the Committee recommended the 
establishment of a salable quantity and allotment percentage of 800,761 
pounds and 38 percent, respectively.
    This proposed rule would limit the amount of spearmint oil that 
handlers may purchase from, or handle for, producers during the 2002-
2003 marketing year, which begins on June 1, 2002. Salable quantities 
and allotment percentages have been placed into effect each season 
since the order's inception in 1980.
    The U.S. production of spearmint oil is concentrated in the Far 
West, primarily Washington, Idaho, and Oregon (part of the area covered 
by the marketing order). Spearmint oil is also produced in the Midwest. 
The production area covered by the marketing order currently accounts 
for approximately 55 percent of the annual U.S. production of Scotch 
spearmint oil

[[Page 10849]]

and over 90 percent of the annual U.S. production of Native spearmint 
oil.
    When the order became effective in 1980, the United States produced 
nearly 100 percent of the world's supply of Scotch spearmint oil, of 
which approximately 72 percent was produced in the regulated production 
area in the Far West. The Far West continued to produce an average of 
about 69 percent of the world's Scotch spearmint oil supply during the 
period from 1980 to 1990. International production characteristics have 
changed since 1990, however, with foreign Scotch spearmint oil 
production contributing significantly to world production. The Far 
West's market share as a percent of total world sales has averaged 
about 44 percent since 1990.
    During the period between 1996 and 2000, the Committee employed a 
marketing strategy for Scotch spearmint oil that was intended to foster 
market stability and expand market share. This marketing strategy was 
an attempt to remain competitive on an international level by regaining 
a substantial amount of the Far West's historical share of the global 
market for this class of oil. In implementing this strategy, the 
Committee had been recommending the establishment of a salable quantity 
and allotment percentage for Scotch spearmint oil in excess of the 
estimated trade demand for each marketing year. In the development of 
its annual marketing policy statements during this period, the 
Committee's strategy considered general market conditions for each 
class of spearmint oil, including the Far West's world market share as 
it relates to the overall market stability of spearmint oil.
    During its deliberations at the October 11, 2000, meeting, however, 
the Committee concluded that this marketing strategy for Scotch 
spearmint oil had not been entirely effective. Although sales had 
increased, the Far West's market share as a percentage of total world 
sales had not increased on average, and the market price for Scotch 
spearmint oil had continued to decline throughout this period. During 
the 1998-1999 and 1999-2000 marketing years, the price paid to 
producers for Scotch spearmint oil dropped to a low of $7.00 per pound. 
Although the current price for Scotch oil has increased to between 
$7.50 and $8.00 per pound, the Committee continues to believe that such 
returns are generally below the cost of production for most producers, 
which, according to the Washington State University Cooperative 
Extension Service (WSU), is currently between $13.87 and $14.62 per 
pound.
    For the 2001-2002 marketing year--the current marketing year--the 
Committee determined at its October 11, 2000, meeting, that it would 
attempt to stabilize prices at a reasonable level while still 
considering global market share. The Committee's transitional 
recommendation for Scotch spearmint oil for the 2001-2002 marketing 
year was, therefore, based on a desire to remain competitive on an 
international level while maintaining the supply of oil at a level that 
could enhance prices and help producers remain solvent. The 2001-2002 
salable quantity is somewhat higher than the estimated trade demand. 
This shifted the Committee's Scotch spearmint oil market strategy from 
one considering primarily the Far West's share of the world market to 
an approach primarily considering current price, supply, and demand. 
This action made an adequate supply of Scotch spearmint oil available 
as evidenced by the substantial amount of oil carried into the 
marketing year.
    Although still concerned with global spearmint oil market share, 
the Committee calculated the 2002-2003 Scotch spearmint oil salable 
quantity and allotment percentage by primarily utilizing information on 
price and available supply as they are affected by the estimated trade 
demand. The recommendation for 2002-2003 implements the Committee's 
stated intent of keeping adequate supplies available at all times, 
while trying to bring prices to growers to a level that will help them 
stay in business and still allow the industry to compete with less 
expensive oil produced outside the regulated area. The industry 
continues to be interested in expanding market share. The Committee's 
calculations are detailed below.
    Despite the recent downward trend in the price of both classes of 
spearmint oil, the Committee believes that the order has contributed 
extensively to the stabilization of producer prices, which prior to 
1980 experienced wide fluctuations from year to year. According to the 
National Agricultural Statistics Service, for example, the average 
price paid for both classes of spearmint oil ranged from about $4.00 
per pound to about $12.50 per pound during the period between 1968 and 
1980. Excluding the most recent three marketing years, prices since the 
order's inception have generally stabilized at about $11.00 per pound 
for Native spearmint oil and at about $13.00 per pound for Scotch 
spearmint oil. Over the last few years, the price has dropped to 
between $8.00 and $11.00 per pound and $9.00 and $10.00 per pound, 
respectively, for Scotch and Native spearmint oils despite the 
Committee's efforts to balance available supplies with demand. Based on 
comments made at the Committee's meeting, factors that are currently 
contributing to depressed prices include the general uncertainty being 
experienced through the U.S. economy and the continuing overall weak 
farm situation, as well as an abundant global supply of spearmint oil.
    Conditions similar to those affecting the Scotch spearmint oil 
market contributed to the Committee's current recommendation for a 
salable quantity of 800,761 pounds and an allotment percentage of 38 
percent for Native spearmint oil for the 2002-2003 marketing year. The 
supply and demand characteristics of the current Native spearmint oil 
market are keeping the price flat at about $9.00 per pound--a level the 
Committee considers too low for the majority of producers to maintain 
viability. The WSU study indicates that the cost of producing Native 
spearmint oil currently ranges from $10.26 to $10.92 per pound. Thus, 
with over 90 percent of the world production currently located in the 
Far West, the Committee's method of calculating the Native spearmint 
oil salable quantity and allotment percentage continues to primarily 
utilize information on price and available supply as they are affected 
by the estimated trade demand. The Committee's stated intent is to make 
adequate supplies available to meet market needs and improve producer 
prices.
    The Committee based its recommendation for the proposed salable 
quantity and allotment percentage for each class of spearmint oil for 
the 2002-2003 marketing year on the information discussed above, as 
well as the data outlined below.

(1) Class 1 (Scotch) Spearmint Oil

    (A) Estimated carry-in on June 1, 2002--260,181 pounds. This figure 
is the difference between the estimated 2001-2002 marketing year trade 
demand of 860,000 pounds and the revised 2001-2002 marketing year total 
available supply of 1,120,181 pounds. The 2001-2002 marketing year 
total available supply was revised due to differences in the carry-in 
estimated on October 11, 2000, and the actual carry-in on June 1, 2001, 
as well as producer deficiencies on June 1, 2001. A producer is 
deficient when the producer is unable to produce oil equal to his or 
her salable quantity and is unable to fill this deficiency from reserve 
pool oil or excess oil from another producer. When prices are below the 
producer's costs of

[[Page 10850]]

production, they reduce acres and produce less oil.
    (B) Estimated trade demand for the 2002-2003 marketing year--
875,000 pounds. This figure represents the Committee's estimate based 
on the average of the estimates provided by producers at five Scotch 
spearmint oil production area meetings held in September 2001, as well 
as estimates provided by handlers and others at the meeting. Handler 
trade demand estimates for the 2002-2003 marketing year ranged from 
675,000 to 900,000 pounds. The last five year average sales were 
936,000 pounds.
    (C) Salable quantity required from the 2002-2003 marketing year 
production--614,819 pounds. This figure is the difference between the 
estimated 2002-2003 marketing year trade demand (875,000 pounds) and 
the estimated carry-in on June 1, 2002 (260,181 pounds).
    (D) Total estimated allotment base for the 2002-2003 marketing 
year--1,887,713 pounds. This figure represents a one-percent increase 
over the revised 2001-2002 total allotment base. This figure is 
generally revised each year on June 1 due to producer base being lost 
based on the provisions of Sec. 985.53(e). The revision is usually 
minimal.
    (E) Computed allotment percentage--32.6 percent. This percentage is 
computed by dividing the required salable quantity by the total 
estimated allotment base.
    (F) Recommended allotment percentage--45 percent. This 
recommendation is based on the Committee's determination that a 
decrease from the current season's allotment percentage of 48 percent 
to the computed 32.6 percent would be too drastic a reduction in a 
single year. The recommended level of 45 percent is also only slightly 
below the 5-year average sales, and if sales in 2002-2003 are average 
or better, the carry-out would be reduced.
    (G) The Committee's recommended salable quantity--849,471 pounds. 
This figure is the product of the recommended allotment percentage and 
the total estimated allotment base.
    (H) Estimated available supply for the 2002-2003 marketing year--
1,109,652 pounds. This figure is the sum of the 2002-2003 recommended 
salable quantity (849,471 pounds) and the estimated carry-in on June 1, 
2002 (260,181 pounds).

(2) Class 3 (Native) Spearmint Oil

    (A) Estimated carry-in on June 1, 2002--198,583 pounds. This figure 
is the difference between the estimated 2001-2002 marketing year trade 
demand of 929,000 pounds and the revised 2001-2002 marketing year total 
available supply of 1,127,583 pounds.
    (B) Estimated trade demand for the 2002-2003 marketing year--
960,000 pounds. This figure is based on input from producers at the 
four Native spearmint oil production area meetings held in September 
2001, from handlers, and from Committee members and other meeting 
participants at the October 3, 2001, meeting. The average estimated 
trade demand at the four production area meetings was 975,000 pounds.
    (C) Salable quantity required from the 2002-2003 marketing year 
production--761,417 pounds. This figure is the difference between the 
estimated 2002-2003 marketing year trade demand (960,000 pounds) and 
the estimated carry-in on June 1, 2002 (198,583 pounds).
    (D) Total estimated allotment base for the 2002-2003 marketing 
year--2,107,267 pounds. This figure represents a one percent increase 
over the revised 2001-2002 total allotment base. This figure is 
generally revised each year on June 1 due to producer base being lost 
based on the provisions of Sec. 985.53(e). The revision normally 
involves a minimal amount of spearmint oil.
    (E) Computed allotment percentage--36.1 percent. This percentage is 
computed by dividing the required salable quantity by the total 
estimated allotment base.
    (F) Recommended allotment percentage--38 percent. This is the 
Committee's recommendation based on the computed allotment percentage, 
the average of the computed allotment percentage figures from the four 
production area meetings (38.1 percent), and input from producers and 
handlers at the October 3, 2001, meeting.
    (G) The Committee's recommended salable quantity--800,761 pounds. 
This figure is the product of the recommended allotment percentage and 
the total estimated allotment base.
    (H) Estimated available supply for the 2002-2003 marketing year--
999,344 pounds. This figure is the sum of the 2002-2003 recommended 
salable quantity (800,761 pounds) and the estimated carry-in on June 1, 
2002 (198,583 pounds).
    The salable quantity is the total quantity of each class of 
spearmint oil which handlers may purchase from or handle on behalf of 
producers during a marketing year. Each producer is allotted a share of 
the salable quantity by applying the allotment percentage to the 
producer's allotment base for the applicable class of spearmint oil.
    The Committee's recommended Scotch and Native spearmint oil salable 
quantities and allotment percentages of 849,471 pounds and 45 percent 
and 800,761 and 38 percent, respectively, are based on the Committee's 
goal of maintaining market stability by avoiding extreme fluctuations 
in supplies and prices and the anticipated supply and trade demand 
during the 2002-2003 marketing year. The proposed salable quantities 
are not expected to cause a shortage of spearmint oil supplies. Any 
unanticipated or additional market demand for spearmint oil which may 
develop during the marketing year can be satisfied by an increase in 
the salable quantities. Both Scotch and Native spearmint oil producers 
who produce more than their annual allotments during the 2002-2003 
season may transfer such excess spearmint oil to a producer with 
spearmint oil production less than his or her annual allotment or put 
it into the reserve pool.
    This proposed regulation, if adopted, would be similar to those 
which have been issued in prior seasons. Costs to producers and 
handlers resulting from this proposed action are expected to be offset 
by the benefits derived from a stable market and improved returns. In 
conjunction with the issuance of this proposed rule, the Committee's 
marketing policy statement for the 2002-2003 marketing year has been 
reviewed by USDA. The Committee's marketing policy statement, a 
requirement whenever the Committee recommends volume regulations, fully 
meets the intent of Sec. 985.50 of the order. During its discussion of 
potential 2002-2003 salable quantities and allotment percentages, the 
Committee considered: (1) The estimated quantity of salable oil of each 
class held by producers and handlers; (2) the estimated demand for each 
class of oil; (3) prospective production of each class of oil; (4) 
total of allotment bases of each class of oil for the current marketing 
year and the estimated total of allotment bases of each class for the 
ensuing marketing year; (5) the quantity of reserve oil, by class, in 
storage; (6) producer prices of oil, including prices for each class of 
oil; and (7) general market conditions for each class of oil, including 
whether the estimated season average price to producers is likely to 
exceed parity. Conformity with the USDA's ``Guidelines for Fruit, 
Vegetable, and Specialty Crop Marketing Orders'' has also been reviewed 
and confirmed.
    The establishment of these salable quantities and allotment 
percentages would allow for anticipated market needs. In determining 
anticipated market needs, consideration by the

[[Page 10851]]

Committee was given to historical sales, as well as changes and trends 
in production and demand. This rule also provides producers with 
information on the amount of spearmint oil which should be produced for 
next season in order to meet anticipated market demand.

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 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 7 spearmint oil handlers subject to regulation under the 
order, and approximately 118 producers of Class 1 (Scotch) spearmint 
oil and approximately 107 producers of Class 3 (Native) spearmint oil 
in the regulated production area. Small agricultural service firms are 
defined by the Small Business Administration (SBA) (13 CFR 121.201) as 
those having annual receipts of less than $5,000,000, and small 
agricultural producers are defined as those whose annual receipts are 
less than $750,000.
    Based on the SBA's definition of small entities, the Committee 
estimates that 2 of the 7 handlers regulated by the order could be 
considered small entities. Most of the handlers are large corporations 
involved in the international trading of essential oils and the 
products of essential oils. In addition, the Committee estimates that 
30 of the 118 Scotch spearmint oil producers and 19 of the 107 Native 
spearmint oil producers could be classified as small entities under the 
SBA definition. Thus, a majority of handlers and producers of Far West 
spearmint oil may not be classified as small entities.
    The Far West spearmint oil industry is characterized by producers 
whose farming operations generally involve more than one commodity, and 
whose income from farming operations is not exclusively dependent on 
the production of spearmint oil. A typical spearmint oil-producing 
operation has enough acreage for rotation such that the total acreage 
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. An average spearmint oil-producing farm has to 
have considerably more acreage than is planted to spearmint during any 
given season. Crop rotation is an essential cultural practice in the 
production of spearmint oil for weed, insect, and disease control. To 
remain economically viable with the added costs associated with 
spearmint oil production, most spearmint oil-producing farms fall into 
the SBA category of large businesses.
    This proposed rule would establish the quantity of spearmint oil 
produced in the Far West, by class, that handlers may purchase from, or 
handle for, producers during the 2002-2003 marketing year. The 
Committee recommended this rule to help maintain stability in the 
spearmint oil market by avoiding extreme fluctuations in supplies and 
prices. Establishing quantities to be purchased or handled during the 
marketing year through volume regulations allows growers to plan their 
mint planting and harvesting to meet expected market needs. This action 
is authorized by the provisions of Secs. 985.50, 985.51 and 985.52 of 
the order.
    Small spearmint oil producers generally are not as extensively 
diversified as larger ones and as such are more at risk to market 
fluctuations. Such small farmers generally need to market their entire 
annual crop and do not have the luxury of having other crops to cushion 
seasons with poor spearmint oil returns. Conversely, large diversified 
producers have the potential to endure one or more seasons of poor 
spearmint oil markets because incomes from alternate crops could 
support the operation for a period of time. Being reasonably assured of 
a stable price and market provides small producing entities with the 
ability to maintain proper cash flow and to meet annual expenses. Thus, 
the market and price stability provided by the order potentially 
benefit the small producer more than such provisions benefit large 
producers. Even though a majority of handlers and producers of 
spearmint oil may not be classified as small entities, the volume 
control feature of this order has small entity orientation.
    Demand for spearmint oil tends to be relatively stable from year-
to-year. The demand for spearmint oil is expected to grow slowly for 
the foreseeable future because the demand for consumer products that 
use spearmint oil will likely expand slowly, in line with population 
growth.
    Demand for spearmint oil at the farm level is derived from retail 
demand for spearmint-flavored products at retail such as chewing gum, 
toothpaste, and mouthwash. The manufacturers of these products are by 
far the largest users of mint oil. However, spearmint flavoring is 
generally a very minor component of the products in which it is used, 
so changes in the raw product price have no impact on retail prices for 
those goods.
    Spearmint oil production tends to be cyclical. Years of large 
production, with demand remaining reasonably stable, have led to 
periods in which large producer stocks of unsold spearmint oil have 
depressed producer prices for a number of years. Shortages and high 
prices may follow in subsequent years, as producers respond to price 
signals by cutting back production.
    The wide fluctuations in supply and prices that result from this 
cycle, which was even more pronounced before the creation of the 
marketing order, can create liquidity problems for some producers. The 
marketing order was designed to reduce the price impacts of the 
cyclical swings in production. However, producers have been less able 
to weather these cycles in recent years because of the decline in 
prices of many of the alternative crops they grow. As noted earlier, 
almost all spearmint oil producers diversify by growing other crops.
    Instability in the spearmint oil subsector of the mint industry is 
much more likely to originate on the supply side than the demand side. 
Fluctuations in yield and acreage planted from season-to-season tend to 
be larger than fluctuations in the amount purchased by buyers.
    The significant variability is illustrated by the fact that between 
1980 and 2000, production tended to vary by 25 percent above and below 
the average production level of 1,888,810 pounds. The 25 percent figure 
(469,321 pounds) is the standard deviation around the average 
production level. Production in the shortest crop year was about 48 
percent of the 21-year average and the largest crop was approximately 
163 percent. A key consequence is that in years of oversupply and low 
prices, the season average producer price of spearmint oil is below the 
average cost of production (as measured by the Washington State 
University Cooperative Extension Service).
    In an effort to stabilize prices, the spearmint oil industry uses 
the volume control mechanisms authorized under the order. This 
authority allows the Committee to recommend a salable quantity and 
allotment percentage for each class of oil for the upcoming marketing 
year. The salable quantity for

[[Page 10852]]

each class of oil is the total volume of that oil which producers may 
sell during the marketing year. The allotment percentage for each class 
of spearmint oil is derived by dividing the salable quantity by the 
total allotment base.
    Each producer is then issued an annual allotment certificate, in 
pounds, for the applicable class of oil, which is calculated by 
multiplying the producer's allotment base by the applicable allotment 
percentage. This is the amount of oil for the applicable class that the 
producer can sell.
    By November 1 of each year, the Committee identifies any oil that 
individual producers have produced above the volume specified on their 
annual allotment certificates. This excess oil is placed in a reserve 
pool administered by the Committee.
    There is a reserve pool for each class of oil which may not be sold 
during the current marketing year unless the Secretary approves a 
Committee recommendation to make a portion of the pool available. 
However, limited quantities of reserve oil are typically sold to fill 
deficiencies. A deficiency occurs when on-farm production is less than 
a producer's allotment. In that case, a producer's own reserve oil can 
be sold to fill that deficiency. Excess production (higher than the 
producer's allotment) can be sold to fill other producers' 
deficiencies.
    In any given year, the total available supply of spearmint oil is 
composed of current production plus carry-over stocks from the previous 
crop. The Committee seeks to maintain market stability by balancing 
supply and demand, and to close the marketing year with an appropriate 
level of carry-out. If the industry has production in excess of the 
salable quantity, then the reserve pool absorbs the surplus quantity of 
spearmint oil, which goes unsold during that year, unless the oil is 
needed for unanticipated sales.
    Under its provisions, the order may attempt to stabilize prices by 
(1) limiting supply and establishing reserves in high production years, 
thus minimizing the price-depressing effect that excess producer stocks 
have on unsold spearmint oil, and (2) ensuring that stocks are 
available in short supply years when prices would otherwise increase 
dramatically. The reserve pool grown in large production years and 
stocks are drawn down in short crop years.
    An econometric model was used to assess the impact that volume 
control has on the prices producers receive for their commodity. 
Without volume control, spearmint oil markets would likely be over-
supplied, resulting in low producer prices and a large volume of oil 
stored and carried over to the next crop year. The model estimates how 
much lower producer prices would likely be in the absence of volume 
controls.
    The Committee estimated the available supply for both classes of 
oil at 2,108,996 pounds, and that the expected carry-in will be 458,764 
pounds. Therefore, with volume control, sales by producers for the 
2002-2003 marketing year should be limited to 1,650,232 pounds (the 
recommended salable quantity for both classes of spearmint oil).
    The recommended salable percentages, upon which 2002-2003 producer 
allotments are based, are 45 percent for Scotch and 38 percent for 
Native. Without volume controls, producers would not be limited to 
these allotment levels, and could produce and sell additional 
spearmint. The econometric model estimated a $1.66 decline in average 
grower price per pound (from both classes or spearmint oil) resulting 
from the higher quantities produced and marketed without volume 
control. Northwest grower prices for both classes of spearmint oil for 
1999 and 2000 averaged $9.13, based on National Agricultural Statistics 
Service data. The severe surplus situation for the spearmint oil market 
that would exist without volume controls in 2002-2003 would also likely 
dampen prospects for improved grower prices in future years because of 
the buildup in stocks.
    The use of volume controls allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have 
little or no effect on consumer prices of products containing spearmint 
oil and will not result in fewer retail sales of such products.
    The Committee discussed alternatives to this rule including higher 
and lower levels for the salable quantities and allotment percentages 
for both classes of oil, as well as not regulating the handling of 
spearmint oil during the 2002-2003 marketing year. The Committee also 
noted that the operation of the marketing order provides valuable 
statistical information on domestic and foreign markets to producers 
and other industry factors.
    The Committee discussed and rejected the idea of not regulating 
Scotch spearmint oil, because of the severe price-depressing effects 
that would occur without volume control.
    The Committee also considered alternative regulation levels for 
Scotch spearmint oil. The Committee explored maintaining the Scotch 
spearmint oil allotment percentage at the same level as the current 
year (48 percent) or increasing the percentage, allowing even more 
product into the market. These options were discussed at length by the 
Committee, producers, and handlers in attendance at the meeting. Both 
options were rejected because current supplies are very abundant and 
resultant prices are considered too low for general producer viability.
    Finally, the Committee discussed recommending a level of regulation 
as low as a 32.6 percent allotment percentage. As noted earlier, the 
Committee determined that a drop in the allotment percentage for Scotch 
spearmint oil from 48 percent during the current year to 32.6 percent 
would likely be too extreme an adjustment in one marketing year. The 
Committee opted for a much smaller decline of 3 percentage points, to a 
salable percentage of 45 percent. The recommended salable quantity is 
849,971 pounds.
    One Committee member, however, voted against the recommended Scotch 
spearmint oil salable quantity and allotment percentage in support of a 
lower level. In consideration of the current, relatively depressed 
price for Scotch spearmint oil, he felt a more restrictive level of 
regulation would help to enhance returns to producers.
    The general consensus of the individuals commenting during the 
meeting indicated strong support for a shift in Scotch spearmint oil 
marketing strategy from one considering primarily the Far West's share 
of the world market to an approach primarily considering current price, 
supply, and demand. The Committee's belief that the Scotch spearmint 
oil market can be improved and stabilized is reflected in its 
recommendation to establish the salable quantity and allotment 
percentage at 849,471 pounds and 45 percent, respectively.
    The Committee discussed alternative allotment percentage levels for 
the other class of spearmint oil (Native) ranging from a low of about 
35 percent to a high of about 41 percent. With the current price for 
Native spearmint oil lower than the 20-year average, and demand fairly 
flat, the Committee, after considerable discussion, determined that 
800,761 pounds and 38 percent would be the most effective salable 
quantity and allotment percentage, respectively, for the 2002-2003 
marketing year.
    The one dissenting member stated that 38 percent is too great a 
change from the current season's allotment

[[Page 10853]]

percentage of 45 percent, and that demand generally supports more 
supply than would be released at 38 percent. After a great deal of 
discussion, the Committee recommended the lower percentage as a means 
of balancing supplies with market needs. If more supplies are needed 
during the marketing year, the percentage could be increased.
    The Committee's recommendation to establish salable quantities and 
allotment percentages for both classes of spearmint oil was made after 
careful consideration of all available information, including: (1) The 
estimated quantity of salable oil of each class held by producers and 
handlers; (2) the estimated demand for each class of oil; (3) 
prospective production of each class of oil; (4) total of allotment 
bases of each class of oil for the current marketing year and the 
estimated total of allotment bases of each class for the ensuing 
marketing year; (5) the quantity of reserve oil, by class, in storage; 
(6) producer prices of oil, including prices for each class of oil; and 
(7) general market conditions for each class of oil, including whether 
the estimated season average price to producers is likely to exceed 
parity. Based on its review, the Committee believes that the salable 
quantity and allotment percentage levels recommended would achieve the 
objectives sought.
    Without any regulations in effect, the Committee believes the 
industry would return to the pronounced cyclical price patterns that 
occurred prior to the order, and that prices in 2002-2003 would decline 
substantially below current levels.
    As stated earlier, the Committee believes that the order has 
contributed extensively to the stabilization of producer prices, which 
prior to 1980 experienced wide fluctuations from year-to-year. National 
Agricultural Statistics Service records show that the average price 
paid for both classes of spearmint oil ranged from about $4.00 per 
pound to about $12.50 per pound during the period between 1968 and 
1980. Prices have been consistently more stable since the marketing 
order's inception in 1980. Excluding the most recent three marketing 
years, prices since the order's inception have generally stabilized at 
about $13.00 per pound for Scotch spearmint oil and about $11.00 per 
pound for Native spearmint oil.
    Over the last three years, however, large production and carry-in 
inventories have contributed to declining prices, despite the 
Committee's efforts to balance available supplies with demand. Over the 
last three years, prices have ranged from $8.00 to $11.00 per pound for 
Scotch spearmint oil and between $9.00 to $10.00 per pound for Native 
spearmint oil.
    According to the Committee, the recommended salable quantities and 
allotment percentages are expected to achieve the goals of market and 
price stability, and price improvement.
    As stated earlier, annual salable quantities and allotment 
percentages have been issued for both classes of spearmint oil since 
the order's inception. Reporting and recordkeeping requirements have 
remained the same for each year of regulation. These requirements have 
been approved by the Office of Management and Budget under OMB Control 
No. 0581-0065. Accordingly, this action would not impose any additional 
reporting or recordkeeping requirements on either small or large 
spearmint oil producers and handlers. All reports and forms associated 
with this program are reviewed periodically in order to avoid 
unnecessary and duplicative information collection by industry and 
public sector agencies. The USDA has not identified any relevant 
Federal rules that duplicate, overlap, or conflict with this proposed 
rule.
    The Committee's meeting was widely publicized throughout the 
spearmint oil industry and all interested persons were invited to 
attend and participate on all issues. In addition, interested persons 
are invited to submit information on the regulatory and informational 
impacts of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    A 15-day comment period is provided to allow interested persons the 
opportunity to respond to the proposal, including any regulatory and 
informational impacts of this action on small businesses. Fifteen days 
is deemed appropriate because this rule would need to be effective as 
soon as possible to provide producers sufficient time prior to the 
beginning of the 2002-2003 marketing year to adjust their cultural and 
marketing plans accordingly. All written comments received within the 
comment period will be considered before a final determination is made 
on this matter.

List of Subjects in 7 CFR Part 985

    Marketing agreements, Oils and fats, Reporting and recordkeeping 
requirements, Spearmint oil.

    For the reasons set forth in the preamble, 7 CFR part 985 is 
proposed to be amended as follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL 
PRODUCED IN THE FAR WEST

    1. The authority citation for 7 CFR part 985 continues to read as 
follows:

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

    2. A new Sec. 985.221 is added to read as follows:

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

Sec. 985.221  Salable quantities and allotment percentages--2002-2003 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2002, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 849,471 pounds and 
an allotment percentage of 45 percent.
    (b) Class 3 (Native) oil--a salable quantity of 800,761 pounds and 
an allotment percentage of 38 percent.

    Dated: March 5, 2002.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-5686 Filed 3-8-02; 8:45 am]
BILLING CODE 3410-02-P