[Federal Register Volume 67, Number 225 (Thursday, November 21, 2002)]
[Rules and Regulations]
[Pages 70133-70140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-29533]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV02-905-5 FIR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Limiting 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 a final 
rule, without change, an interim final rule limiting the volume of 
small red seedless grapefruit entering the fresh market under the 
marketing order covering oranges, grapefruit, tangerines, and tangelos 
grown in Florida (order). The Citrus Administrative Committee 
(Committee) administers the order locally and recommended this action. 
This rule limits the volume of sizes 48 and 56 red seedless grapefruit 
shipped during the first 22 weeks of the 2002-03 season by continuing 
in effect the weekly percentages established for each of the 22 weeks, 
beginning September 16, 2002. This action supplies enough small red 
seedless grapefruit, without saturating all markets with these small 
sizes. This rule should help stabilize the market and improve grower 
returns.

EFFECTIVE DATE: December 23, 2002.

FOR FURTHER INFORMATION CONTACT: William G. Pimental, 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 No. 84 and Marketing Order No. 905, both as amended (7 CFR 
part 905),

[[Page 70134]]

regulating the handling of oranges, grapefruit, tangerines, and 
tangelos grown in Florida, hereinafter referred to as the ``order.'' 
The marketing agreement and order are effective under the Agricultural 
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), 
hereinafter referred to as the ``Act.''
    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. 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.
    This rule limits the volume of sizes 48 and 56 red seedless 
grapefruit shipped during the first 22 weeks of the 2002-03 season by 
continuing in effect the weekly percentages established for each of the 
22 weeks, beginning September 16, 2002. This action supplies enough 
small red seedless grapefruit, without saturating all markets with 
these small sizes. This rule should help stabilize the market and 
improve grower returns.
    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 is 
established as a percentage of the total shipments of such variety 
shipped by that handler during a prior period, established by the 
Committee and approved by 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. The regulation period is 22 weeks long 
and begins 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.
    This rule limits 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 by continuing in effect the weekly 
percentages established for the first 22 weeks of the 2002-03 season. 
This rule establishes weekly percentages at 45 percent for weeks 1 and 
2 (September 16 through September 29), 35 percent for weeks 3 through 
19 (September 30, 2002 through January 26, 2003), and 40 percent for 
weeks 20, 21, and 22 (January 27 through February 16). The Committee 
recommended this action by a vote of 14 in favor and 2 against at a 
meeting on May 22, 2002.
    The Committee believes the over shipment of smaller-sized red 
seedless grapefruit has a detrimental effect on the market. While there 
is a market for small-sized red seedless grapefruit, the availability 
of large quantities oversupplies the fresh market with these sizes and 
negatively impacts the market for all sizes. These smaller sizes, 48 
and 56, normally return the lowest prices when compared to the other 
larger sizes. However, when there is too much volume of the smaller 
sizes available, the overabundance of small sized fruit pulls the 
prices down for all sizes.
    For the past four seasons, the volume of small sizes available 
throughout the season has been considerably larger than in past 
seasons. The smaller sizes have represented a larger portion of the 
crop at the beginning of the season and this trend has continued 
throughout the season. The fruit has not been sizing well. This means a 
greater number of small sizes are available later in the season. The 
percentage of total available volume represented by small sizes has 
been higher for nearly every month of the season when compared to the 
same months in previous seasons. This has exacerbated the problems 
stemming from the oversupply of small sizes and increased the number of 
weeks of a season impacted.
    For the last three seasons, 1999-2000, 2000-01, and 2001-02, the 
percentage of the remaining crop represented by small sizes in February 
has averaged around 53 percent. This compares to an average of 31 
percent for the same month for the seasons 1995-96 through 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 seasons 1995-96 through 1997-98. For the last seven seasons 
there has been a movement toward an increased 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 1999-2000, 2000-01, and 2001-02 
seasons were comparable or exceeded the volume available in 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
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                                        95-96   96-97   97-98                              99-00   00-01   01-02
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October..............................     43%     62%     73%   December................     58%     56%     64%
November.............................     34%     56%     61%   January.................     49%     54%     60%
December.............................     30%     51%     52%   February................     50%     53%     56%
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[[Page 70135]]

    The chart shows the percentage of the crop represented by small 
sizes increasing fairly substantially beginning as early as the 1996-97 
season. 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. 
Percentage of size regulation was first used to control the volume of 
small sizes during the first 11 weeks of the 1997-98 season.
    The Committee recognized that 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 the early and midseason also represents 
a problem for the industry.
    For the 2002-03 season, the Committee believes there will continue 
to be a surplus of red seedless grapefruit. The Committee believes for 
the 2002-03 season fruit size will continue to follow the trend toward 
smaller sizes as seen in the past few years and will have an abundant 
number of small-sized fruit. To address the volume of small-sized red 
seedless grapefruit available and to prevent the over shipment of small 
sizes, the Committee voted to utilize the provisions of Sec.  905.153 
and establish percentage of size regulation for each of the 22 weeks of 
the regulatory period for the 2002-03 season.
    In making its recommendation, the Committee considered the success 
of previous percentage of size regulations and their experience from 
past seasons. The Committee believes the over shipment of smaller-sized 
red seedless grapefruit contributes to poor returns for growers and 
lower prices. The Committee has successfully used the provisions of 
Sec.  905.153 to address these problems, recommending percentage of 
size regulation during the first 11 weeks of the 1997-98, 1998-99, 
1999-2000, and 2000-01 seasons, and for the first 22 weeks of the 2001-
02 season. Under percentage of size regulation, prices increased and 
movement stabilized when compared to seasons without regulation.
    For the three seasons prior to the use of percentage size 
regulation, 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 $6.87 per box (1 3/5 bushel) during the 1991-92 season, 
to $3.38 per box during the 1993-94 season, to $1.91 per box during the 
1996-97 season.
    An economic study done by the University of Florida--Institute of 
Food and Agricultural Sciences (UF-IFAS) in May 1997, found that on-
tree prices had fallen from a high near $7.00 per carton in 1991-92 to 
around $1.50 per carton for the 1996-97 season. The study projected 
that if the industry elected to make no changes, the on-tree price 
would remain around $1.50 per carton. The study also indicated that 
increasing minimum size restrictions could help raise returns.
    The Committee believes percentage of size regulation has been 
effective in stabilizing prices, both f.o.b. and on-tree. In the three 
seasons prior to the first percentage of size regulation in 1997-98, 
prices of red seedless grapefruit fell from a weighted average f.o.b. 
price of $7.80 per carton in October to a weighted average f.o.b. price 
of $5.50 per carton in December. In the five seasons utilizing 
percentage of size regulation, red seedless grapefruit maintained 
higher prices throughout the season with a weighted average f.o.b. 
price of $8.03 per carton in October, to an average f.o.b. price of 
$7.01 per carton in December, and remained at around $6.70 in April. 
Average prices for the season have also been higher during seasons with 
percentage of size regulation. The average season price for red 
seedless grapefruit was $7.00 for the last five years compared to $5.83 
for the three prior years.
    The University of Florida, Citrus Research and Education Center 
published an estimated cost of production per acre for the 2000-2001 
season. The cost to produce Florida citrus fruit for the fresh market 
was estimated 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.
    During the past five seasons, red seedless grapefruit production 
has averaged around 409 boxes per acre. Based on the cost of production 
above, and the number for the average boxes per acre, growers need to 
earn a total on-tree value (fruit going both to the fresh market and to 
processing) of approximately $2.25 per box in order to break even. For 
the three seasons prior to the use of percentage of size regulation, 
the total on-tree value averaged $1.78 per box. Comparatively, for the 
seasons with regulation, 1997-98 through 2000-01, the on-tree value 
averaged $2.36 per box.
    On-tree prices for fresh red seedless grapefruit have also been 
higher during seasons with percentage of size regulation than for the 
three seasons prior to regulation. The average on-tree price for fresh 
red seedless grapefruit was $4.30 for the seasons 1997-98 through 2000-
01 with percentage of size regulation compared to $3.08 for the three 
years prior to regulation. Small growers have struggled the last eight 
seasons to receive returns near the cost of production. For many, these 
higher returns mean the difference between profit and loss.
    Another benefit of percentage of size regulation has been in 
maintaining higher prices for the larger-sized fruit. At the start of 
the season, larger-sized fruit command a premium price. In some cases, 
the f.o.b. price is $4 to $10 more a carton than for the smaller sizes. 
The last three seasons, the f.o.b. price for a size 27 has averaged 
around $13.50 per carton in October. This compares to an average f.o.b. 
price of around $5.80 per carton for a size 56 during the same period. 
In the three years before the issuance of a percentage size regulation, 
the f.o.b. price for large sizes dropped to within $1 or $2 of the 
f.o.b. price for small sizes by the middle of the season due to the 
oversupply of small sizes.
    Percentage of size regulation has helped sustain the price 
differential, maintaining higher prices for the larger-sized fruit. 
During the three years before regulation, the average differential 
between the 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 five years with percentage of size regulation, the average 
differential between the carton price for a size 27 and a size 56 was 
$5.44 at the end of October, was $3.87 in mid-December, and remained at 
$3.49 the first week in April.
    The margins between the prices for the various sizes of red 
grapefruit have remained fairly constant throughout the seasons covered 
under percentage of size regulation. According to the Economic Analysis 
and Program Planning Branch (EAPP), USDA, if the domestic market 
becomes glutted with too many small-sized grapefruit (48 and 56), these 
margins would be negatively impacted and total grower returns would be 
reduced.
    The goal of this percentage of size rule is to reduce the volume of 
the least

[[Page 70136]]

valuable fruit in the market and strengthen grower prices and revenues. 
Without this rule, the fresh grapefruit market will become glutted with 
small-sized fruit, which will have a negative impact on prices for 
larger-sized fruit and grower returns. Absent this rule, the price 
margins between sizes (23, 27, 32, 36, 40, 48, and 56) will diminish 
and ultimately result in lower grower returns. This rule is intended to 
fully supply all markets for small sizes with fresh red seedless 
grapefruit size 48 and 56, while avoiding oversupplying these markets 
to the detriment of grower revenues.
    Shipments during the 22 weeks covered by this regulation account 
for nearly 60 percent of the total volume of red seedless grapefruit 
shipped to the fresh market. Considering this volume and the very 
limited returns from grapefruit 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 Committee believes percentage of size regulation has also 
helped stabilize the volume of small sizes entering the fresh market. 
During deliberations in past seasons, the Committee considered how 
shipments of small sizes had effected the market. Based on available 
statistical information, Committee members concluded that once 
shipments of sizes 48 and 56 reached levels above 250,000 cartons per 
week, prices declined on those and most other sizes of red seedless 
grapefruit. The Committee believed if shipments of small sizes are 
maintained at around or below 250,000 cartons a week, prices will 
stabilize and demand for larger, more profitable sizes will increase.
    The last five seasons during the weeks regulated by a percentage of 
size regulation, the weekly shipments of sizes 48 and 56 red seedless 
grapefruit remained near or below 250,000 cartons for 90 percent of the 
regulated weeks. There has also been a 43 percent reduction in the 
volume of small sizes entering the fresh market during the weeks 
regulated from the 1995-96 season to the 2000-01 season.
    An economic study done by Florida Citrus Mutual (Lakeland, Florida) 
in April 1998, also found that weekly percentage regulation was 
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 prices were generally 
higher across the size spectrum with sizes 48 and 56 having the largest 
gains, and larger-sized grapefruit registering modest improvements. The 
rule shifted the size distribution toward the higher-priced, larger-
sized grapefruit, which helped raise weekly average f.o.b. prices. It 
further stated that sizes 48 and 56 grapefruit accounted for around 27 
percent of domestic shipments during the same 11 weeks during the 1996-
97 season. Comparatively, sizes 48 and 56 accounted for only 17 percent 
of domestic shipments during the same period in 1997-98, as small sizes 
were used to supply export customers with preferences for small-sized 
grapefruit.
    In addition to the success of previous regulations, there are other 
surrounding circumstances that warrant the consideration of the 
establishment of percentage of size regulation. The production area was 
up until June, suffering through a period of insufficient rainfall. The 
area received normal to above normal rainfall during the months of 
June, July, August, and September. However, it is unclear how this will 
affect the sizing of the crop. In previous seasons, when insufficient 
rainfall was followed by normal rainfall, a large volume of small-sized 
red seedless grapefruit was produced.
    Problems with the European and Asian markets could also impact the 
volume of small sizes available. In past seasons, these markets have 
shown a strong demand for the smaller-sized red seedless grapefruit. 
However, the reduction in shipments to these areas experienced during 
the last few years is expected to continue during the current season. 
This could result in a greater amount of small sizes for remaining 
markets to absorb.
    The condition of the market for processed grapefruit is also a 
consideration. Approximately 52 percent of red seedless grapefruit on 
average is used for processing, with the majority being squeezed for 
juice. However, this outlet offers limited returns and currently is not 
profitable. Statistics from the Florida Department of Citrus (FDOC) 
projected that over 32 weeks worth of red grapefruit juice would remain 
in inventory at the start of the season. This is expected to have an 
additional negative impact on returns.
    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. Over the period from 
1977 through 2000, the differential between fresh prices and processed 
prices has averaged $3.55 per box. Consequently, growers prefer to ship 
grapefruit to the fresh market.
    A fair percentage of red seedless grapefruit shipped for processing 
tend toward the smaller sizes. When returns for processed red 
grapefruit are low, an additional volume of small sizes could be 
shifted toward the fresh market, further aggravating problems with 
excessive volumes of small sizes. Due to current inventories, on-tree 
prices for processed red seedless grapefruit for the 2002-03 season 
will most likely mirror prices from past seasons and remain below a 
dollar. This could force an additional volume of small sizes toward the 
fresh market.
    Further, red seedless grapefruit production continues to exceed 
demand. This has contributed to the low returns and led to economic 
abandonment of grapefruit. According to information from the National 
Agricultural Statistics Service, the seasons of 1995-96, 1996-97, 1997-
98, and 2000-01 had an average economic abandonment of two million 
boxes or more of red seedless grapefruit. Complete data for the 2001-02 
season is not yet available. However, it is likely that some economic 
abandonment did occur last season. Economic abandonment and prices 
falling below the cost production support the use of percentage of size 
regulation to control the volume of small sizes. The percentage of size 
regulation has an impact and is intended to make the most economically 
viable fruit available to the fresh market without oversupplying small-
sized fruit. These considerations further support the need to control 
the volume of small sizes during the season to prevent the volume of 
small sizes from overwhelming all markets.
    The Committee believes the problems associated with an uncontrolled 
volume of small sizes entering the market will recur without regulation 
and that establishing weekly percentages during the last five seasons 
has proven successful. Consequently, the Committee recommended weekly 
percentages be established for all 22 weeks of the regulatory period, 
beginning at 45 percent for the first two weeks, 35 percent for weeks 3 
through 19, and 40 percent for weeks 20, 21, and 22.
    The Committee considered the percentages set last year as a basis 
for discussing this year's percentages. Committee members believed 
relaxing last season's percentages from the most

[[Page 70137]]

restrictive level allowed of 25 percent had worked well, providing some 
restriction while affording volume for those markets that prefer small 
sizes. Also, while the Committee has in past seasons initially voted to 
set weekly percentages at 25 percent, the Committee has never 
maintained the percentages at the 25 percent level, but has always 
relaxed the percentages closer to the start of the season.
    Drawing on this experience, the Committee decided to make its 
initial recommendations for each of the 22 weeks at levels higher than 
25 percent. The recommended percentages closely approximate the final 
percentages recommended last season. The percentages are the same as 
last season for weeks 1, 2, 3, 19, 21, and 22, represent a 5 percent 
increase for weeks 4 through 10 and weeks 15 through 18 and for week 
20, and represent a 5 percent decrease for weeks 11 through 14. All are 
within 5 percent of those recommended last season.
    More information helpful in determining the appropriate weekly 
percentages was available after August. At the time of the May meeting, 
grapefruit had just begun to size, giving little indication as to the 
distribution of sizes. Only the most preliminary of crop estimates was 
available, with the official estimate issued in October. Further, the 
first reports on how the crop was sizing were not available until after 
September. Consequently, the Committee believed it was best to set 
regulation at these levels, and then relax the percentages later in the 
season if conditions warrant. The Committee met again on September 10, 
2002, and agreed to maintain the percentages as established.
    The Committee recognized that they could meet again during the 
regulation period, as needed, and use the most current information to 
consider adjustments in the weekly percentage rates. This will help the 
Committee make the most informed decisions as to whether the 
established percentages are appropriate. Any changes to the weekly 
percentages set by this rule will require additional rulemaking and the 
approval of USDA.
    During deliberations in past seasons, Committee members 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 
are maintained at around or below 250,000 cartons a week, prices should 
stabilize and demand for larger, more profitable sizes should increase.
    The Committee considered the 250,000-carton level when recommending 
the weekly percentages. The first two weeks were set high at 45 percent 
because it was anticipated that only a limited volume would be shipped. 
In the last four seasons, shipments of sizes 48 and 56 have never 
exceeded 250,000 cartons during the first two weeks. Setting weekly 
percentages at 35 percent for the majority of weeks provides a total 
available allotment of around 269,150 cartons (35 percent of the total 
industry base of approximately 769,000 cartons) per week. While this is 
slightly more than 250,000 cartons, it is unlikely all available 
allotment will be used each week, and this allows individual handlers 
some additional flexibility. The increase to 40 percent for the last 
three weeks is to provide a little more allotment at the end of the 
regulated period to provide some transition to the period of no 
regulation and to help prevent the dumping of small sizes following the 
end of regulation. The Committee believes these percentages provide 
some flexibility while holding weekly shipments of sizes 48 and 56 
close to the 250,000-carton mark.
    The Committee believes the volume of small red seedless grapefruit 
available will have a detrimental effect on the market if it is not 
controlled. Members believe the problems successfully addressed by 
percentage of size regulation the last five seasons will return without 
regulation. Consequently, the Committee believes weekly percentage of 
size regulation should be established for each of the 22 weeks of the 
regulatory period. Therefore, this rule establishes weekly percentages 
at 45 percent for the first two weeks, 35 percent for weeks 3 through 
19, and at 40 percent for weeks 20 through 22. The Committee plans to 
meet as needed during the 22-week period to ensure that the weekly 
percentages are at the appropriate levels.
    While the recommendation to establish percentage of size regulation 
was accepted by a majority of Committee members, some raised concerns 
about export markets and the loan and transfer system. These concerns 
provided the basis for the two Committee members who opposed the 
Committee's recommendation.
    One area of concern was the impact this regulation may have on 
exports. One member stated that market share was being lost in Europe 
to Turkey and Israel. The purpose of this regulation is not to 
eliminate the marketing of sizes 48 and 56, but rather to prevent the 
over shipment of such sizes from saturating all markets.
    In making its recommendations, the Committee recognized that 
markets exist for small sizes. That is why they recommended limiting 
the volume of small sizes instead of eliminating them. The Committee 
considered the markets available for small sizes and set a weekly 
percentage sufficient to address these markets. The weekly percentages 
are set to allow handlers enough volume of small sizes to meet the 
markets that prefer them, such as the export market, while preventing 
an oversupply that effects other markets. Also, there are provisions to 
handle potential allotment shortfalls an individual handler might have. 
These include loans and transfers, or using the allowances for over 
shipment.
    In terms of exports of red seedless grapefruit, volume the last two 
seasons has averaged around 13,832,750 cartons according to the Florida 
Department of Agriculture (FDOA). Based on information available on 
sizes exported, the last two seasons sizes 48 and 56 have averaged 42 
percent of the exports of red seedless grapefruit (FDOA). On average, 
53 percent of exports occur after the end of the 22 week regulated 
period. Industry members have stated that the largest markets for small 
sizes do not usually start until late January or in February. This 
would skew the volume of small sizes exported toward the latter part of 
the season where there are no limitations on small sizes. Consequently, 
that would mean a greater percent of small sizes are shipped after 
regulation. Therefore, using the 42 percent figure to calculate the 
volume of small sizes shipped during the first 22 weeks is probably 
close or exceeds the actual percentage represented by small sizes for 
those weeks.
    For the 22 weeks of regulation, when total weekly exports were 
multiplied by 42 percent to estimate the volume of small sizes exported 
each week, total allotment available during the 22 weeks as established 
by the percentages in this rule exceeds the calculated weekly volume of 
small sizes exported during each regulation week. In addition, the 
higher percentages recommended by the Committee for the last three 
weeks of the regulatory period will also help provide additional 
allotment as the major export period begins. Thus, the allotment of 
small sizes provided under this rule should be sufficient to service 
export demand for small sizes, allowing Florida to maintain those 
markets.
    In regard to foreign competitors taking markets from Florida, 
available information indicates that this should not be a significant 
problem. The UF-IFAS study determined that foreign

[[Page 70138]]

competition is minimal. It also inferred that even in cases of 
tightened standards, foreign competitors are not likely to take market 
share from Florida. Information from the Foreign Agricultural Service, 
USDA, and the Florida Department of Citrus indicates production and 
fresh shipments are of limited quantities in both Israel and Turkey. 
Current statistics show their available volume would significantly 
limit their ability to consistently impact Florida's market share. 
Total production of grapefruit in Israel is less than 18 percent of the 
Florida grapefruit crop while Turkey's is less than 8 percent. Turkey 
and Israel may have lower transportation costs due to their closer 
proximity to Europe.
    Another concern was the loans and transfers system. One member 
expressed concern about the fairness of the program and the 
availability of allotment for loans and transfers. The purpose of loans 
and transfers is to promote the movement of allotment between those who 
have allotment but no fruit to those with fruit but no allotment. It is 
an individual handler's responsibility to try to locate available 
allotment when they need it. Last season, there were 451 loans and 
transfers representing 645,386 cartons. Nearly all grapefruit handlers 
participated in the loan and transfer process last season.
    In some weeks, there was more allotment available than in others. 
However, the purpose of this regulation is to limit the volume of small 
sizes that are entering the fresh market. The allotment available is 
calculated using the prior period so that when the Committee considers 
establishing percentage of size regulation they have a good idea of the 
total allotment made available each week by establishing different 
percentages. By allowing loans and transfers, a greater share of the 
total allotment available each week can be utilized. This allows the 
actual shipments of small sizes to closely approximate the shipments 
the Committee believes the market can handle when it recommends weekly 
percentages. Without loans and transfers there would be less volume 
available and the regulation would be more restrictive.
    After considering the concerns expressed, and the available 
information, the Committee determined that this rule was needed to 
regulate shipments of small-sized red seedless grapefruit.
    Under Sec.  905.153, the quantity of sizes 48 and 56 red seedless 
grapefruit a handler may ship during a regulated week is calculated 
using the set weekly percentage. A handler's allotment of small sizes 
is calculated by taking the weekly percentage times the average weekly 
volume of red seedless grapefruit handled by such handler in the 
previous five seasons. The product is that handler's total allotment of 
sizes 48 and 56 red seedless grapefruit for the given week. This 
average week is the base for each handler for each of the 22 weeks of 
the regulatory period. Handlers can fill their allotment with size 56, 
size 48, or a combination of the two sizes such that the total of these 
shipments is within the established limits. The Committee staff 
performs the specified calculations and provides them to each handler.
    The regulatory period began the third Monday in September, 
September 16, 2002. Each regulation week begins Monday at 12:00 a.m. 
and ends at 11:59 p.m. the following Sunday.
    Section 905.153(d) provides the allowances for overshipments, 
loans, and transfers of allotment. These tolerances allow handlers the 
opportunity to supply their markets while limiting the impact of small 
sizes.
    The Committee can also act on behalf of handlers wanting to arrange 
allotment loans or participate in the transfer of allotment. Repayment 
of an allotment loan is at the discretion of the handlers' party to the 
loan. The Committee will inform each handler of the quantity of sizes 
48 and 56 red seedless grapefruit they can handle during a particular 
week, making the necessary adjustments for overshipments and loan 
repayments.
    Section 8e of the Act requires that whenever grade, size, quality, 
or maturity requirements are in effect for certain commodities under a 
domestic marketing order, including grapefruit, imports of that 
commodity must meet the same or comparable requirements. This rule does 
not change the minimum grade and size requirements under the order, 
only the percentages of sizes 48 and 56 red grapefruit that may be 
handled. Therefore, no change is necessary in the grapefruit import 
regulations as a result of this action.

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 the 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 11,000 growers of citrus 
in the regulated area. Small agricultural service firms, including 
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 2001-02 
season was approximately $7.12 per 4/5 bushel carton, and total fresh 
shipments for the 2001-02 season are estimated at 25.6 million cartons 
of red grapefruit. Approximately 33 percent of all handlers handled 72 
percent of Florida's grapefruit shipments. Using the average f.o.b. 
price, at least 66 percent of the 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.
    The over shipment of small-sized red seedless grapefruit 
contributes to poor returns and lower on-tree values. This rule limits 
the volume of sizes 48 and 56 red seedless grapefruit shipped during 
the first 22 weeks of the 2002-03 season by continuing in effect the 
weekly percentages established for each of the 22 weeks, beginning 
September 16, 2002. This rule sets the weekly percentages at 45 percent 
for weeks 1 and 2, 35 percent for week 3 through week 19, and at 40 
percent for weeks 20, 21, and 22. The quantity of sizes 48 and 56 red 
seedless grapefruit that may be shipped by a handler during a 
particular week is calculated using the percentages set. This action 
supplies enough small red seedless grapefruit, without saturating all 
markets with small sizes. This action helps stabilize the market and 
improve grower returns. This rule uses the provisions of Sec.  905.153. 
Authority for this action is provided in Sec.  905.52 of the order. The 
Committee recommended this action on a vote of 14 in favor and 2 
opposed at a meeting on May 22, 2002.
    The Committee believes there will continue to be an oversupply of 
red seedless grapefruit and that the volume of small sizes available 
will continue to

[[Page 70139]]

be a problem in the 2002-03 season. The Committee also believes that 
fruit size for the 2002-03 season will continue to follow the trend 
toward smaller sizes as seen in the past few years and will have an 
abundant number of small-sized fruit. Consequently, the Committee voted 
to utilize the provisions of Sec.  905.153 and establish percentage 
size regulation for each of the 22 weeks of the regulatory period.
    While the establishment of volume regulation may necessitate 
additional spot picking, which could entail slightly higher harvesting 
costs, in most cases this is already a standard industry practice. In 
addition, 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 
undersized fruit is not harvested. This may result in a cost savings 
through 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. Consequently, this rule is not expected to 
appreciably increase costs to producers.
    If a 25 percent restriction on small sizes had been applied during 
the 22-week period for the three seasons prior to the 1997-98 season, 
an average of 3.1 percent of overall shipments during that period would 
have been constrained by regulation. A large percentage of this volume 
most likely could have been replaced by larger sizes for which there 
are no volume restrictions. Under 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 have the option of over 
shipping their allotment by 10 percent in a week, provided the over 
shipment is deducted from the following week's shipments. Approximately 
451 loans and transfers were utilized last season. Statistics for 2001-
02 show that, in only 2 weeks of the regulated period was the total 
available allotment used. Therefore, with the weekly percentages for 
the majority of weeks set slightly higher than for last season, the 
overall impact of this regulation on total shipments should be minimal.
    The Committee believes establishing percentage of size regulation 
during the 2002-03 season will have benefits similar to those realized 
under past regulations. Handlers and producers have received higher 
returns under percentage of size regulation. In the three seasons prior 
to the first percentage of size regulation in 1997-98, prices of red 
seedless grapefruit fell from a weighted average f.o.b. price of $7.80 
per carton in October to a weighted average f.o.b. price of $5.50 per 
carton in December. In the five seasons utilizing percentage of size 
regulation, red seedless grapefruit maintained higher prices throughout 
the season with a weighted average f.o.b. price of $8.03 per carton in 
October, to an average f.o.b. price of $7.01 per carton in December, 
and remained at around $6.70 in April. Average prices for the season 
have also been higher during seasons with percentage of size 
regulation. The average season price for red seedless grapefruit was 
$7.00 for the last five years compared to $5.83 for the three prior 
years.
    On-tree earnings per box for fresh red seedless grapefruit have 
also improved under regulation, providing better returns to growers. 
The average on-tree price for fresh red seedless grapefruit was $4.30 
for the seasons 1997-98 through 2000-01 with percentage of size 
regulation, compared to $3.08 for the three years prior to regulation. 
Small growers have struggled the last eight seasons to receive returns 
near the cost of production. For many, the higher returns mean the 
difference between profit and loss.
    Shipments during the 22 weeks covered by this regulation account 
for nearly 60 percent of the total volume of red seedless grapefruit 
shipped to the fresh market. Considering this volume and the very 
limited returns from grapefruit for processing, it is imperative 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.
    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 22-week period, would represent an 
increased return of nearly $1.4 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. Percentage of size regulation is intended to 
reduce the volume of the least valuable fruit in the market, and shift 
it to those markets that prefer small sizes. This regulation helps the 
industry address marketing problems by keeping small sizes (sizes 48 
and 56) more in balance with market demand without glutting the fresh 
market with these sizes.
    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. With supply in excess of 
demand, this rule is not expected to impact consumer prices or demand. 
The benefits of this rule are expected to be available to 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 several alternatives to taking this 
action. One alternative was to establish the weekly percentages at 25 
percent for all weeks and adjust the percentages later in the season as 
was done in previous seasons. This alternative was rejected as the 
Committee drew on past experiences and sought to provide handlers with 
specific shipping percentages earlier in the season to allow them 
greater flexibility in formulating marketing plans in a timely manner.
    Another alternative discussed was to provide each handler with the 
equivalent of one extra week of allotment to use any time during the 
season and to eliminate loans and transfers. This would have allowed a 
handler to over-ship any quantity of small sizes up to his extra 
allotment in one week or divided up through the season. The Committee 
believed that if prices were at a premium, most handlers would take 
advantage of these higher prices and ship well over what the market 
channels could absorb. This alternative was also rejected.
    Other alternatives considered centered around setting the weekly 
percentages at levels different than those recommended. After 
discussion, the Committee agreed on the percentages established in the 
rule. Members thought it was best to set regulation at these levels, 
and then relax the percentages later in the season if conditions 
warrant. The Committee recognized that they could meet again during the 
regulation period, as needed, and use the most current information to 
consider adjustments in the weekly percentage rates. Therefore, these 
alternative percentages were also rejected.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the information collection requirements contained in this 
rule have been previously approved by the Office

[[Page 70140]]

of Management and Budget (OMB) and assigned OMB No. 0581-0189. As with 
all Federal marketing order programs, reports and forms are 
periodically reviewed to reduce information requirements and 
duplication by industry and public sectors.
    USDA has not identified any relevant Federal rules that duplicate, 
overlap or conflict with this rule. However, red seedless grapefruit 
must meet the requirements as specified in the U.S. Standards for 
Grades of Florida Grapefruit (7 CFR 51.760 through 51.784) issued under 
the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 through 1627).
    The Committee's meeting was widely publicized throughout the citrus 
industry and all interested persons were invited to attend the meeting 
and participate in Committee deliberations on all issues. Like all 
Committee meetings, the May 22, 2002, meeting was a public meeting and 
all entities, both large and small, were able to express views on this 
issue.
    An interim final rule concerning this action was published in the 
Federal Register on September 10, 2002. Copies of the rule were mailed 
by the Committee's staff to all Committee members and grapefruit 
handlers. In addition, the rule was made available through the Internet 
by the Office of the Federal Register and USDA. That rule provided for 
a 30-day comment period, which ended October 10, 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 rule, without change, as published in the 
Federal Register (67 FR 57319, September 10, 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 rule amending 7 CFR part 905 which 
was published at 67 FR 57319, September 10, 2002, is adopted as a final 
rule without change.

    Dated: November 13, 2002.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-29533 Filed 11-20-02; 8:45 am]
BILLING CODE 3410-02-P