[Federal Register Volume 67, Number 115 (Friday, June 14, 2002)]
[Rules and Regulations]
[Pages 40837-40844]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15063]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket Nos. FV01-905-1 FIR; FV01-905-2 FIR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Modifying Procedures and Establishing Regulations To Limit the Volume 
of Small Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: The Department of Agriculture (USDA) is adopting, as final 
rules, without change, two interim final rules that regulated small red 
seedless grapefruit entering the fresh market

[[Page 40838]]

during the 2001-02 season under the marketing order for oranges, 
grapefruit, tangerines, and tangelos grown in Florida. The order is 
administered locally by the Citrus Administrative Committee 
(Committee). This rule finalizes weekly percentages that were 
established for the first 11 weeks of the season. It also continues in 
effect the increase in the number of weeks available for percentage of 
size regulation from 11 to 22 weeks and finalizes the percentages 
established for the last 6 of those weeks. The interim final rules were 
intended to supply enough small red seedless grapefruit without 
saturating all markets, thus helping to stabilize supply and improve 
grower returns.

EFFECTIVE DATE: July 15, 2002.

FOR FURTHER INFORMATION CONTACT: William G. Pimental, Marketing 
Specialist, Southeast Marketing Field Office, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 799 
Overlook Drive, Suite A, Winter Haven, Florida, 33884-1671; telephone: 
(863) 324-3375, Fax: (863) 325-8793; 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 rule is issued under Marketing 
Agreement 84 and Marketing Order No. 905, both as amended (7 CFR part 
905), regulating the handling of oranges, grapefruit, tangerines, and 
tangelos grown in Florida, hereinafter referred to as the ``order.'' 
The 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 USDA is issuing this rule in conformance with Executive Order 
12866.
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This rule will not preempt any State or local laws, regulations, or 
policies, unless they present an irreconcilable conflict with this 
rule.
    The Act provides that administrative proceedings must be exhausted 
before parties may file suit in court. Under section 608c(15)(A) of the 
Act, any handler subject to an order may file with 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. Such 
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.
    This rule adopts, without change, the provisions of two interim 
final rules that regulated the volume of sizes 48 (3\9/16\ inches 
minimum diameter) and 56 (3\5/16\ inches minimum diameter) red seedless 
grapefruit entering the fresh market under the order. This rule 
finalizes the weekly percentages established for the first 11 weeks of 
the 2001-02 season. It also continues in effect the increase in the 
number of weeks available for percentage of size regulation from 11 
weeks to 22 weeks and the percentages established for the last 6 of 
those weeks. The interim final rules were intended to supply enough 
small red seedless grapefruit without saturating all markets, thus 
helping to stabilize supply and improve grower returns. These actions 
were recommended unanimously at two industry meetings on May 22, 2001, 
and August 29, 2001.
    Section 905.52 of the order provides authority to limit shipments 
of any grade or size, or both, of any variety of Florida citrus. Such 
limitations may restrict the shipment of a portion of a specified grade 
or size of a variety. Under such a limitation, the quantity of such 
grade or size a handler may ship during a particular week would be 
established as a percentage of the total shipments of such variety by 
such handler in a prior period, established by the Committee and 
approved by the USDA.
    Section 905.153 of the regulations provides procedures for limiting 
the volume of small red seedless grapefruit entering the fresh market. 
The procedures specify that the Committee may recommend that only a 
certain percentage of sizes 48 and 56 red seedless grapefruit be made 
available for shipment into fresh market channels for any week or weeks 
during the regulatory period. Currently, the regulation period covers 
22 weeks starting the third Monday in September. Under such a 
limitation, the quantity of sizes 48 and 56 red seedless grapefruit 
that may be shipped by a handler during a regulated week is calculated 
using the recommended percentage. By taking the recommended weekly 
percentage times the average weekly volume of red seedless grapefruit 
handled by such handler in the previous five seasons, handlers can 
calculate the total volume of sizes 48 and 56 they may ship in a 
regulated week.

Background

    For the seasons 1994-95, 1995-96, and 1996-97, returns for red 
seedless grapefruit had been declining, often not returning the cost of 
production. On-tree prices for red seedless grapefruit had fallen 
steadily from $9.60 per carton (\4/5\ bushel) during the 1989-90 
season, to $3.45 per carton during the 1994-95 season, to $1.41 per 
carton during the 1996-97 season.
    The Committee determined that one problem contributing to the 
market's condition was the excessive number of small-sized grapefruit 
shipped early in the marketing season. In the 1994-95, 1995-96, and 
1996-97 seasons, sizes 48 and 56 accounted for 34 percent of total 
shipments during the 11-week regulatory period, with the average weekly 
percentage exceeding 40 percent of shipments. This contrasted with 
sizes 48 and 56 representing only 26 percent of total shipments for the 
remainder of the season.
    While there is a market for early grapefruit, shipping large 
quantities of small red seedless grapefruit in a short period 
oversupplies the fresh market for these sizes and negatively impacts 
the market for all sizes. For the majority of the season, larger sizes 
return higher prices than smaller sizes. However, there is a push to 
get fruit into the market early to take advantage of high prices 
available at the beginning of the season. The early season crop tends 
to have a greater percentage of small sizes. This creates a glut of 
smaller, lower-priced fruit on the market, driving down the price for 
all sizes.
    The Committee believes that the over shipment of smaller sized red 
seedless grapefruit contributes to poor returns for growers and lower 
on-tree values. To address this issue, the Committee successfully used 
the provisions of Sec. 905.153, and recommended weekly percentage of 
size regulation during the first 11 weeks of the 1997-98, 1998-99, 
1999-2000, and 2000-01 seasons. Under regulation, f.o.b. and on-tree 
prices have increased and movement has stabilized.

[[Page 40839]]

    Average f.o.b. prices were higher during the 11-week percentage of 
size regulation than for the three years prior to regulation. The 
average price for red seedless grapefruit in late October was $8.46 per 
carton for the regulated seasons compared to $7.22 for the same period 
for the three years before regulation. Prices have also remained at a 
higher level, with an average f.o.b. price of $7.29 per carton in mid-
December during the years with regulation compared to $6.02 for the 
three prior years. The average season f.o.b. price has also been 
higher, averaging $7.15 per carton during years with 11-week regulation 
compared to $5.83 for the three prior seasons without regulation.
    The on-tree returns per box for fresh red seedless grapefruit also 
improved during 11-week regulation, providing better returns to 
growers. On-tree returns increased from $2.85 in 1997-98, to $4.52 in 
1998-99, to $5.52 for the 1999-2000 season.
    Another benefit of regulation has been in maintaining higher prices 
for the larger-sized fruit. Larger fruit commands a premium price early 
in the season. However, the glut of smaller, lower-priced fruit on the 
early market was driving down the prices for all sizes. During the 
three years before regulation, the average differential between the 
f.o.b. carton price for a size 27 and a size 56 was $3.47 at the end of 
October. However, by mid-December the price for the larger size had 
dropped to within $1.68 of the price for the smaller-size fruit.
    In the four years of regulation, the average differential between 
the f.o.b. carton price for a size 27 and a size 56 was $5.38 at the 
end of October and remained at $3.42 in mid-December. In fact, the 
average f.o.b. prices for each size were higher during the four years 
with regulation than for the three years prior to regulation. The 
average prices for size 27, size 32, size 36, and size 40 during the 
11-week period for the last four years were $9.41, $8.12, $7.26, and 
$6.68, respectively. This compares to the average prices for the same 
sizes during the same period for the three years prior to regulation of 
$6.48, $5.63, $5.59, and $5.34, respectively.
    Eleven-week percentage of size regulation also helped stabilize the 
volume of small sizes entering the fresh market early in the season. 
During the three years prior to the 11-week regulation, small sizes 
accounted for over 34 percent of the total shipments of red seedless 
grapefruit during the 11-week period covered. This compares to 31 
percent for the same period during the last four years with 11-week 
regulation. There has also been a 43 percent reduction in the volume of 
small sizes entering the fresh market during the 11-week regulatory 
period from 1995-96 to 2000-01.
    An economic study done by Florida Citrus Mutual (Lakeland, Florida) 
in April 1998, found that the weekly percentage regulation had been 
effective. The study stated that part of the strength in early season 
pricing appeared to be due to the use of the weekly percentage rule to 
limit the volume of sizes 48 and 56. It said that prices were generally 
higher across the size spectrum with sizes 48 and 56 having the largest 
gains, and larger-sized grapefruit registering modest improvements. The 
rule shifted the size distribution toward the higher-priced, larger-
sized grapefruit, helping raise weekly average f.o.b. prices. It 
further stated that sizes 48 and 56 grapefruit accounted for around 27 
percent of domestic shipments during the same 11 weeks during the 1996-
97 season. Comparatively, sizes 48 and 56 accounted for only 17 percent 
of domestic shipments during the same period in 1997-98, as small sizes 
were used to supply export customers with preferences for small-sized 
grapefruit.
    Based on available statistical information, the Committee concluded 
that once shipments of sizes 48 and 56 reached levels above 250,000 
cartons a week, prices declined on those and most other sizes of red 
seedless grapefruit. The Committee believed if shipments of small sizes 
could be maintained at around or below 250,000 cartons a week, prices 
should stabilize and demand for larger, more profitable sizes should 
increase.

First Eleven Week 2001-02 Discussion

    Based on this and prior season experience, on May 22, 2001, the 
Committee unanimously voted to establish a weekly percentage of 45 
percent for the first 2 weeks, 35 percent for week 3, and 25 percent 
for weeks 4 through 11. The Committee's initial recommendation was 
issued as a proposed rule published in the Federal Register on July 31, 
2001 (66 FR 39459). No comments were received during the comment 
period, which expired August 10, 2001.
    The Committee subsequently met on August 29, 2001, and unanimously 
recommended adjusting the percentages. The Committee determined that 
the initial recommendation was too restrictive, and recommended raising 
the percentages from 25 percent to 30 percent for weeks 4 through 10 
and 40 percent for week 11 of the regulated period. The Committee's 
revised recommendation was issued as an interim final rule published in 
the Federal Register on September 26, 2001 (66 FR 49088). No comments 
were received during the comment period, which expired October 9, 2001.
    Based on current 2001-02 crop and marketing information available 
to the Committee in August, the Committee recommended establishing the 
weekly percentages at levels higher than 25 percent for the last 8 
weeks of the regulated period. The Committee agreed that the percentage 
recommended for the first two weeks of 45 percent was still 
appropriate, as was 35 percent for week three. However, the Committee 
recommended that weeks 4 through 10 should be established at 30 
percent, and that week 11 should be established at 40 percent. The 
Committee recommended setting the percentage for week 11 at a higher 
level because that week marks the start of the holiday season and a 
large volume of small sizes are used for gift fruit shipments and 
fundraisers.
    In setting the weekly percentages at 45 percent for the first two 
weeks and 35 percent for week 3, the total available allotment would be 
slightly more than 250,000 cartons in the first three weeks. However, 
in the last four seasons when percentage size regulations have been 
effective, shipments of sizes 48 and 56 have never exceeded 250,000 
cartons in the first three weeks. Setting the weekly percentages at 25 
percent for the 2001-2002 season would have provided a total allotment 
of approximated 203,300 cartons (25 percent of the total industry base 
of 813,191 cartons). Consequently, there was room to increase the 
percentages while holding weekly shipments of sizes 48 and 56 close to 
the 250,000-carton mark.

Discussion of Twenty-Two Week Percentage of Size Regulation

    This final rule also continues in effect the expansion of the weeks 
available for limiting the volume of small red seedless grapefruit 
entering the fresh market from the first 11 weeks of each season to the 
first 22 weeks, finalizes the weekly base percentages established for 
the last 6 of the 22-week regulatory period for the 2001-02 season. On 
August 29, 2001, The Committee recommended the percentages be set at 40 
percent for the first 3 weeks (December 3 through December 23) and 30 
percent for the remaining eight weeks (December 24 through February 17) 
of the second 11 weeks. However, because of available timeframes, 
weekly percentages were established for just the last 6 weeks of the 
second 11-week regulatory period (January 7 through February 17, 2002). 
These actions were

[[Page 40840]]

issued as an interim final rule published in the Federal Register on 
January 8, 2002 (67 FR 801). No comments were received during the 
comment period, which expired January 23, 2002.
    The continued ability to use percentage size regulations for the 
first 22 weeks of the season is expected to help the industry stabilize 
supplies and prices for red seedless grapefruit. This in itself does 
not limit shipments, but expands the weeks available for percentage of 
size regulation to 22 weeks so small sizes can be regulated for an 
additional 11 weeks, if needed.
    The rule creating Sec. 905.153 (December 31, 1996, 61 FR 69011) 
established procedures for percentage of size regulation of small red 
seedless grapefruit. It provided a tool, if needed, to help stabilize 
price and supply. The procedures were established to cover an 11-week 
period to address problems associated with the oversupply of small-
sized red seedless grapefruit early in the season. As previously 
mentioned, the Committee believed that the overshipment of early, 
small-sized fruit was depressing the market for all red seedless 
grapefruit, and concluded that having a tool to limit the amount of 
small red grapefruit entering the fresh market would be very helpful in 
addressing this problem. The Committee recommended 11 weeks because at 
that time the majority of small sizes were being shipped during this 
period. By the end of the 11 weeks, fruit had usually begun to size, 
and there were fewer small sizes available.
    However, this is no longer the case. The fruit is not sizing as in 
past seasons for reasons yet to be determined, leaving a larger supply 
of smaller sizes available later in the season. For the past three 
seasons, the volume of small sizes available from December through 
February has been much larger than in past seasons. Returns on red 
seedless grapefruit have also been declining during this period. The 
Committee has concluded that the problems associated with small red 
seedless grapefruit have begun to extend beyond the 11-week regulation 
period. The Committee believes the increased volumes of small red 
seedless grapefruit shipped or available to be shipped during the 
middle of the season is having a detrimental effect on the market. The 
Committee recommended increasing the weeks available for percentage of 
size regulation to address this problem.
    The last three seasons, 1998-99, 1999-2000, and 2000-01, have shown 
a marked increase in the volume of small-sized red seedless grapefruit 
available later in the season. For these three seasons, the percentage 
of the crop represented by small sizes in the month of February has 
averaged 51 percent. This compares to an average of 26 percent for the 
same month for the three prior seasons (1995-96, 1996-97, and 1997-98). 
In fact, the last three seasons have averaged a greater percentage of 
smaller sizes across each month, October through February, than over 
the three previous seasons. The trend across the last six seasons has 
been a continuing increase in the volume of small sizes as a percentage 
of the overall crop. This is most dramatically evidenced by the 72 
percent increase in small sizes as a percentage of the overall crop 
from February 1996 to February 2001.
    The volume of small-sized red seedless grapefruit available in 
December, January, and February for the 1998-99, 1999-2000, and 2000-01 
seasons were comparable or exceeded volumes available for October, 
November, and December for the 1995-96, 1996-97, and 1997-98 seasons. 
The following chart shows the volume of sizes 48 and smaller red 
seedless grapefruit available for these months as a percentage of the 
total crop.

                                                   Sizes 48 and Smaller as a Percentage of Total Crop
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                95-96        96-97        97-98                                       98-99        99-00        00-01
--------------------------------------------------------------------------------------------------------------------------------------------------------
October....................................           43           62           73  December.....................           56           64           64
November...................................           34           56           61  January......................           54           58           57
December...................................           32           51           52  February.....................           50           49           54
--------------------------------------------------------------------------------------------------------------------------------------------------------

    It was following the 1995-96 season that the Committee began its 
initial discussions regarding the need to control the volume of small-
sized red seedless grapefruit entering the fresh market early in the 
season. Percentage of size regulation was first used to control the 
volume of small sizes during the first 11 weeks of the 1997-98 season. 
Small sizes were a problem at those volume levels for the months of 
October through December for the 1995-96, 1996-97, and 1997-98 seasons. 
Having comparable or greater volumes of small sizes available during 
midseason also represents a problem for the industry.
    The University of Florida, Citrus Research and Education Center 
estimated fresh Florida citrus cost of production per acre for the 
2000-2001 season at $882.25 per acre for the SunRidge area, or the 
interior of the state, $907.72 per acre for the Gulf production area, 
and $974.46 per acre for the Indian River area, or the Atlantic coast 
region. Using an average of these estimates, it cost approximately $921 
per acre to cultivate citrus for the fresh market in 2000-2001. This 
average represents a somewhat lower cost of production than what most 
growers of red seedless grapefruit experience because a major share of 
production is in the Indian River area.
    The past five seasons red seedless grapefruit production has 
averaged around 409 boxes (1\3/5\ bushels) per acre. For the 2000-2001 
season, the estimated average on-tree value for red seedless grapefruit 
was $2.10 per box. Using these numbers, total on-tree revenue for the 
2000-2001 season calculates as approximately $859 per acre. When 
combined with the cost of production, the average red seedless 
grapefruit producer in Florida had a negative return of more than $62 
per acre or $0.15 per box.
    On-tree returns have been below production costs for seven of the 
last eight seasons. Growers have benefited from several years of 
increased on-tree returns due to the 11-week percentage of size 
regulation. While 11-week regulation has improved the situation, it has 
not solved all the problems. For the first time since the 1997-98 
season, grower returns have decreased. Total on-tree returns declined 
from $3.36 during the 1999-2000 season to $2.10 for the 2000-01 season. 
On-tree returns for fresh red grapefruit also declined by 22 percent.
    Comparing on-tree returns for fresh sales by month shows that for 
the seasons 1997-98, 1998-99, and 1999-2000, there was an average 
decline in returns of $.60 per box from November to February. By 
combining this $.60 reduction with the average volume of 4.7 million 
boxes of red seedless grapefruit moved during this period, the drop in 
revenue to growers is nearly $2.8 million. During a period when growers 
are struggling to realize returns at least equal the cost of 
production; this $.60 can mean the difference between profit and loss.

[[Page 40841]]

    F.o.b. prices have also stabilized under 11-week regulation. 
However, while it has helped eliminate dramatic drops in price during 
the first 11 weeks, prices have continued to decrease throughout the 
season. For the seasons 1998-99, 1999-2000, and 2000-01, red seedless 
grapefruit prices fell from an average f.o.b. price of $7.72 per carton 
(\4/5\ bushel) in November to an average f.o.b. price of $7.02 in 
February. As with grower returns, after two years of increased average 
season f.o.b. prices, this past season, 2000-01, represented a $.50 per 
carton decrease from the prior season.
    The Committee believes the overshipment of smaller sized red 
seedless grapefruit during the middle of the season is contributing to 
poor returns and lower prices. Committee members agreed that extending 
the weeks available for percentage of size regulation an additional 11 
weeks provides a tool to address the problems associated with small 
sizes during the middle of the season. The Committee supports the 
additional weeks because they have successfully used Sec. 905.153 to 
address very similar problems for the first 11 weeks of the season. As 
previously stated, under 11-week regulation, f.o.b. prices and on-tree 
returns increased and movement stabilized as compared to years with no 
11-week percentage of size regulation.
    Much of what the Committee is seeing in the second 11 weeks of the 
season reminds them of the adverse conditions they were facing during 
the first 11 weeks for the 1994-95, 1995-96, and 1996-97 seasons. The 
Committee believes the problems successfully addressed by using the 11-
week percentage of size regulation during the first part of the season 
are the same problems they are now seeing during the middle of the 
season. Therefore, the Committee believes expanding the period 
available for percentage of size regulation under Sec. 905.153 from 11 
weeks to 22 weeks provides them with the best tool to address these 
problems.
    On average, 51 percent of red seedless grapefruit is shipped to 
fresh market channels. There is a processing outlet for grapefruit, 
with the majority, 49 percent on average, squeezed for juice. This 
outlet offers limited returns and currently is not profitable.
    For the 2000-2001 season, on-tree returns were negative for 
processed red seedless grapefruit. During the last five years, only 
1999-2000 produced on-tree returns for processed red seedless 
grapefruit that exceeded one dollar per box. When on-tree returns for 
processed grapefruit drop below a dollar, there is pressure to shift a 
larger volume of the overall crop to the fresh market to benefit from 
the higher prices normally paid for fresh fruit. Because a fair 
percentage of red seedless grapefruit shipped for processing tend 
toward the smaller sizes, shifting volume from processing to fresh can 
mean an additional volume of small sizes on the fresh market, further 
exacerbating problems with excessive volumes of small sizes.
    Recent statistics from the Florida Department of Citrus show a 40-
week inventory of processed grapefruit from the 2000-01 season. This 
had an additional negative impact on expected returns. Projected on-
tree prices for processed red seedless grapefruit for the 2001-02 
season are low due to the large quantities of stored juice. This fact, 
combined with the past history for juice prices, further supports the 
need to have the additional 11 weeks available to control excessive 
volumes of small sizes during the middle of the season.
    Shipments during the 11 weeks added by this regulation account for 
nearly 50 percent of the total volume of red seedless grapefruit 
shipped to the fresh market. Considering this volume and the limited 
returns for processing, it is important that returns from the fresh 
market be maximized during this period. Even a small increase in price 
when coupled with the volume shipped represents a significant increase 
in the overall return to growers.
    The 11-week percentage of size regulation in place for the first 
part of the season has been having the desired effect on early markets 
the past four seasons. However, when the regulation period ends, there 
is an increased supply of small red seedless grapefruit shipped to the 
fresh market. This has had a depressing effect on price and grower 
returns. The Committee decided it needed to be able to regulate 
shipments of small-sized red seedless grapefruit during the middle part 
of the marketing season. Therefore, the Committee voted to increase the 
weeks available for regulation from 11 to 22 weeks.
    This rule also finalizes the weekly percentages established for the 
last 6 of the additional 11 regulation weeks for the 2001-02 season. 
The Committee met August 29, 2001, and recommended that percentages be 
set at 40 percent for the first 3 weeks (December 3 through December 
23) and 30 percent for the remaining eight weeks (December 24 through 
February 17). However, because of available timeframes, weekly 
percentages were established for only the last 6 weeks of the second 
11-week period at 30 percent (January 7 through February 17, 2002). The 
percentages were intended to supply enough small-sized red seedless 
grapefruit to meet market demand, without saturating all markets with 
these small sizes.
    As stated earlier, for the 1998-99, 1999-2000, and 2000-01 seasons 
there has been a substantial increase in the volume of small sizes 
available later in the season. Small sizes available for shipment in 
December, January, and February for the 1998-99, 1999-2000, and 2000-01 
seasons equal or exceed volumes available during October, November, and 
December for the 1995-96, 1996-97, and 1997-98 seasons. Estimates by 
the Florida Agricultural Statistics Service show that small sizes 
represent a large percentage of the 2001-02 crop, accounting for over 
83 percent of the fruit per September measurements.
    On-tree returns dropped from $3.36 during the 1999-2000 season to 
$2.10 for the 2000-01 season. On-tree returns for fresh red grapefruit 
also declined by 22 percent. In addition, on-tree returns declined an 
average of $.60 from November to February for the seasons 1997-98, 
1998-99, and 1999-2000. By combining this $.60 reduction with an 
average volume of 4.7 million boxes shipped during this period the loss 
in grower returns tops nearly $2.8 million.
    In the past three seasons, 1998-99, 1999-2000, and 2000-01, prices 
of red seedless grapefruit fell from an average f.o.b. price of $7.72 
per carton in November to an average f.o.b. price of $7.02 in February. 
Also, after two years of increased average season f.o.b. prices, the 
2000-01 season marked a $.50 per carton decrease from the prior season.
    The Committee believes excessive shipments of small red seedless 
grapefruit during the second 11 weeks of the season are contributing to 
the market's poor condition. Shipments of small sizes in December 
through February exceed those shipped during September through November 
by nearly 91,000 cartons a week on average. There is a market for small 
red seedless grapefruit. However, shipping large quantities in a short 
period oversupplies the market for these small sizes and negatively 
impacts the market for all sizes.
    To address similar problems with an oversupply of small sizes and 
decreasing returns, the Committee successfully used the provisions of 
Sec. 905.153, and recommended weekly regulation of small sizes during 
the first 11 weeks of the 1997-98, 1998-99, 1999-2000, 2000-01, and 
2001-02 seasons. Under the 11-week regulations, prices increased and 
movement stabilized as compared to seasons without 11-week regulation.

[[Page 40842]]

    In making the recommendation to establish weekly percentages for 
the second 11 weeks, Committee members considered the success of the 
11-week regulations during the early season and their experiences from 
past seasons. Members reviewed shipment data covering the second 11-
week period for the last three seasons. The information contained the 
amounts and percentages of sizes 48 and 56 shipped during each week.
    Committee members agreed limiting the volume of small sizes 
available for the fresh market has been successful. The Committee 
believes that the volume of small sizes will be a problem during the 
middle of the season, and that limiting the volume available for 
shipment will be beneficial.
    Based on available statistical information, Committee members 
concluded once shipments of sizes 48 and 56 reached levels above 
250,000 cartons a week, prices declined on those and most other sizes 
of red seedless grapefruit. During the second 11-week period of the 
last three seasons, shipments of sizes 48 and 56 red seedless 
grapefruit exceeded 250,000 cartons an average of 5 of the 11 weeks. 
For the 1998-99, 1999-2000, and 2000-01 seasons, shipments of sizes 48 
and 56 red seedless grapefruit from the second 11 weeks exceeded 
shipments of small sizes from the first 11 weeks by an average of 
nearly one million cartons. This may have contributed to the problems 
facing the industry.
    Setting the weekly percentages at 30 percent for the remaining 6 
weeks of the second 11-week period during the 2001-02 season provided a 
total available weekly allotment of approximately 244,000 cartons (30 
percent of the total industry base of 813,191 cartons). Setting the 
weekly percentages at this level allowed total shipments of small red 
seedless grapefruit to approach the 250,000-carton mark during the 
regulated period without exceeding it.
    The Committee believes that the problems associated with an 
uncontrolled volume of small sizes entering the market in the middle of 
the season will continue without regulation. Therefore, this rule 
continues in effect the authority for the Committee to use percentage 
of size regulations during the first 22 weeks of any season, when 
needed.
    The provisions governing the operation of percentage of size 
regulation remain the same. The Committee still cannot set restrictions 
tighter than 25 percent. The method for calculating base and allotment 
also remains the same. The only changes to Sec. 905.153 are the number 
of available regulation weeks and the cut off period for overshipments.
    The rules governing percentage size regulation contain a variety of 
provisions designed to provide handlers with some marketing 
flexibility. Section 905.153(d) provides allowances for overshipments, 
loans, and transfers of allotment. This rule makes one slight change to 
the provisions governing overshipments. During a week of percentage of 
size regulation, any person who has received an allotment can handle an 
amount of sizes 48 and 56 red seedless grapefruit equal to their weekly 
allotment, plus an additional overshipment amount not to exceed 10 
percent of that week's allotment. The quantity of overshipments is 
deducted from the handler's allotment for the following week. 
Previously, Sec. 905.153 stated that overshipments were not allowed 
during week 11 because there were no allotments the following week from 
which to deduct the overshipments. This rule changes this to read that 
no overshipments are allowed during week 22 to reflect the longer 
period for which percentages may be established.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this final regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf. Thus, both statutes have small 
entity orientation and compatibility.
    There are approximately 75 grapefruit handlers subject to 
regulation under the order and approximately 10,000 growers of citrus 
in the regulated area. Small agricultural service firms, which includes 
handlers, are defined by the Small Business Administration (SBA) as 
those having annual receipts of less than $5,000,000, and small 
agricultural producers are defined as those having annual receipts of 
less than $750,000 (13 CFR 121.201).
    Based on industry and Committee data, the average annual f.o.b. 
price for fresh Florida red seedless grapefruit during the 2000-01 
season was approximately $7.20 per \4/5\ bushel carton, and total fresh 
shipments for the 2000-01 season are estimated at 24.7 million cartons 
of red grapefruit. Approximately 25 percent of all handlers handled 70 
percent of Florida grapefruit shipments. Using the average f.o.b. 
price, about 69 percent of grapefruit handlers could be considered 
small businesses under SBA's definition. Therefore, the majority of 
Florida grapefruit handlers may be classified as small entities. The 
majority of Florida grapefruit producers may also be classified as 
small entities.
    This rule adopts, without change, the provisions of two interim 
final rules regulating the volume of sizes 48 and 56 red seedless 
grapefruit entering the fresh market under the order. The overshipment 
of small red seedless grapefruit has contributed to poor returns for 
growers and lower on-tree values. This rule finalizes weekly 
percentages established for the first 11 weeks of the 2001-02 season. 
It also continues in effect the increase in the weeks available for 
percentage of size regulation from 11 weeks to 22 weeks and finalizes 
the percentages set for the last 6 of those weeks for 2000-01. 
Authority for these actions is provided in Sec. 905.52 of the order. 
This rule also uses the provisions of Sec. 905.153. The rule is based 
on unanimous recommendations of the Committee at meetings on May 22, 
and August 29, 2001.
    The change increasing the weeks available for regulation from 11 to 
22 weeks only provides additional weeks for percentage of size 
regulation. It in itself does not establish any restriction on 
shipments. Having the ability to control the volume of small red 
seedless grapefruit the first 11 weeks of a seasons has been an 
important tool. The Committee believes the benefits derived under 11 
weeks of volume regulation will continue if the period available for 
volume regulation is increased to 22 weeks. With the trend being more 
small sizes available later in a season, having the ability to regulate 
volume during the middle of the season will be a valuable asset. The 
purpose of this change is to provide a tool to prevent a surplus of 
small-sized red seedless grapefruit from damaging the overall 
grapefruit market during the middle part of the season. A tool that 
will help stabilize price and returns benefits both small and large 
producers and handlers.
    This rule also finalizes the percentages that limited the volume of 
sizes 48 and 56 red seedless grapefruit entering the fresh market 
during the first 11 weeks of the 2001-02 season, beginning September 
17, 2001. The weekly percentages were 45 percent for

[[Page 40843]]

the first two weeks, 35 percent for week 3, 30 percent for weeks 4 
through 10, and 40 percent for week 11.
    This rule also finalizes weekly percentages established for 6 of 
the 11 weeks added to the regulatory period for the 2001-02 season. The 
Committee recommended weekly percentages of 40 percent for the first 
three weeks (December 3 through December 23) and 30 percent for the 
eight remaining weeks (December 24 through February 17) of the second 
11-week period. However, because of available timeframes, weekly 
percentages were established for just the last 6 weeks of the second 
11-week regulatory period at 30 percent (January 7, 2002, through 
February 17, 2002).
    While the establishment of volume regulation may necessitate spot 
picking, which could entail slightly higher harvesting costs, many 
producers are already using the practice. However, with spot picking, 
the persons harvesting the fruit are more selective and pick only the 
desired sizes and qualities. This reduces the amount of time and effort 
needed in sorting fruit, because undersize fruit is not harvested. This 
practice may also result in reduced processing and packing costs. In 
addition, because this regulation is only in effect for part of the 
season, the overall effect on costs is minimal. This rule is not 
expected to appreciably increase costs to producers.
    If a 25 percent restriction on small sizes had been applied during 
the 11-week period at the start of the season for the three seasons 
prior to 1997-98, an average of 4.2 percent of overall shipments during 
that period would have been constrained by regulation. Similarly, if a 
25 percent restriction on small sizes had been applied during the 
second 11-week period for the three prior seasons, an average of 4.9 
percent of the overall shipments during that period would have been 
subject to regulation. A large percentage of this volume most likely 
could have been replaced by larger sizes for which there are no volume 
restrictions. Under percentage of size regulation, larger sizes have 
been substituted for smaller sizes with a nominal effect on overall 
shipments.
    In addition, handlers can transfer, borrow, or loan allotment based 
on their needs in a given week. Handlers also can overship their 
allotment by 10 percent in a week, provided any overshipments are 
deducted from the following week's shipments. Transfers and loans have 
been used very effectively during past seasons with percentage of size 
regulation. Therefore, the overall impact of this regulation on total 
shipments should not be substantial.
    Handlers and producers have received higher returns under the 11-
week percentage of size regulations issued for the first 11 weeks of 
the last four seasons. In late October, during the four years with 11-
week regulation, the average f.o.b. price for red seedless grapefruit 
was $7.99 per carton compared to $7.22 for the three years prior to 
regulation. F.o.b. prices also have remained higher, with an average 
price of $7.29 in mid-December during 11-week regulation compared to 
$6.02 for the three years prior to regulation. Season average prices 
were also higher under 11-week regulation averaging $7.14 per carton 
compared to $5.83 for the prior three years. On-tree earnings per box 
for fresh red seedless grapefruit also improved under regulation, 
providing better returns to growers. The on-tree price increased from 
$3.26 per box in 1996-97, to $3.42 for 1997-98, to $5.04 for 1998-99, 
to $5.62 for the 1999-2000 season. These increased returns offset any 
additional costs associated with the 11-week regulation.
    The Committee believes that if the 11-week regulation at the start 
of a season has been successful in controlling the volume of small 
sizes and increasing returns, applying similar volume regulation during 
the second 11 weeks of the season should also be effective. Even if 
this action was only successful in raising returns by $.10 per carton, 
this increase in combination with the substantial number of shipments 
generally made during this second 11-week period, would represent an 
increased return of nearly $1 million. Consequently, any increased 
returns generated by this action should more than offset any additional 
costs associated with this regulation.
    The purpose of this rule is to help stabilize the market and 
improve grower returns. This rule provides a supply of small-sized red 
seedless grapefruit sufficient to meet market demand, without 
saturating all markets with these small sizes. This action is not 
expected to decrease the overall consumption of red seedless 
grapefruit. It is expected to benefit all red seedless grapefruit 
growers and handlers regardless of their size of operation. This rule 
will likely help small under-capitalized growers who need additional 
weekly revenues to meet operating costs.
    The Committee considered alternatives to the actions taken in this 
rule. One alternative was to leave the established weekly percentages 
at 25 percent for weeks 4 through 11. The Committee thought this was 
too restrictive and wanted to provide individual handlers more 
flexibility in weeks 4 through 11; therefore this option was rejected. 
Two other alternatives considered were not increasing the number of 
weeks available, and increasing the regulation period to include all 33 
weeks of a season. Committee members agreed producers and handlers 
would benefit from smaller-sized fruit being controlled for a greater 
portion of the season. They also noted that the majority of export 
shipments occur during the last 11 weeks of the season helping to 
alleviate problems with small sizes during that part of the season. 
Consequently, these alternatives were also rejected.
    Other alternatives considered focused on the length of the holiday 
season and percentages set for that period. The holiday season is the 
weeks before Christmas when a large volume of small sizes is used for 
gift fruit shipments and fundraisers. One alternative was to add an 
additional week to those weeks considered as the holiday season, and 
set higher percentages for the first four weeks rather than the first 
three. Another alternative discussed was setting percentages higher 
than 40 percent for the weeks covered that were considered part of the 
holiday season. The Committee reviewed and discussed the suggestions 
and agreed that the weeks included and the percentages recommended the 
second 11 weeks of the 2001-02 season were the best solutions based on 
the information available. Therefore, these alternates also were 
rejected.
    This action required two new handler reports, forms 301A and 302A. 
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35), AMS obtained emergency approval for a new information 
collection request under OMB No. 0581-0200 for Oranges, Grapefruit, 
Tangerines, and Tangelos Grown in Florida, Marketing Order No. 905. The 
emergency request was necessary because insufficient time was available 
to follow normal clearance procedures. Subsequent to the emergency 
approval by OMB, this information collection has since been merged 
under OMB No. 0581-0189, Generic OMB Fruit Crops. As with all Federal 
marketing order programs, reports and forms are periodically reviewed 
to reduce information requirements and duplication by industry and 
public sector agencies.
    As noted in the initial regulatory flexibility analyses, USDA has 
not identified any relevant Federal rules that duplicate, overlap or 
conflict with this rule. However, red seedless

[[Page 40844]]

grapefruit must meet the requirements as specified in the U.S. 
Standards for Grades of Florida Grapefruit (7 CFR 51.760 through 
51.784) issued under the Agricultural Marketing Act of 1946 (7 U.S.C. 
1621 through 1627).
    The Committee's meetings were widely publicized throughout the 
Florida citrus industry and all interested persons were invited to 
attend the meetings and participate in Committee deliberations on all 
issues. Like all Committee meetings, the May 22, and August 29, 2001, 
meetings were public meetings and all entities, both large and small, 
were able to express views on this issue.
    The two interim final rules concerning these actions were published 
in the Federal Register, one on September 26, 2001 (66 FR 39459) and 
one on January 8, 2002 (67 FR 801). Copies of the rules were mailed or 
sent via facsimile to all Committee members and citrus handlers. 
Finally, both rules were made available through the Internet by the 
Office of the Federal Register and USDA. The rule published on 
September 26, 2001, provided a 20-day comment period that ended October 
9, 2001. The rule published on January 8, 2002, provided a 15-day 
comment period that ended January 23, 2002. No comments were received.
    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.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
finalizing the interim final rules, without change, as published in the 
Federal Register (66 FR 39459, September 26, 2001) and (67 FR 801, 
January 8, 2002) will tend to effectuate the declared policy of the 
Act.

List of Subjects in 7 CFR Part 905

    Grapefruit, Marketing agreements, Oranges, Reporting and 
recordkeeping requirements, Tangelos, Tangerines.

PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN 
FLORIDA

    Accordingly, the interim final rules amending 7 CFR part 905 which 
were published at 66 FR 49088 on September 26, 2001 and at 67 FR 801 on 
January 8, 2002, are adopted as final rules without change.

    Dated: June 10, 2002.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-15063 Filed 6-13-02; 8:45 am]
BILLING CODE 3410-02-P