[Federal Register Volume 68, Number 220 (Friday, November 14, 2003)]
[Rules and Regulations]
[Pages 64494-64499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28520]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV03-905-3 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 2003-04 season by continuing 
in effect the weekly percentages for each of the 22 weeks, beginning 
September 15, 2003. 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 15, 2003.

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), 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 small red seedless grapefruit 
entering the fresh market. This rule restricts the volume of sizes 48 
and 56 fresh red seedless grapefruit shipped during the first 22 weeks 
of the 2003-04 season by establishing a weekly percentage for each of 
the 22 weeks, beginning September 15, 2003. This rule supplies enough 
small red seedless grapefruit, without saturating all markets with 
these small sizes. This action 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 continues to limit the volume of sizes 48 (3\9/16\ inches 
minimum diameter) and 56 (3\5/16\ inches minimum diameter) red seedless

[[Page 64495]]

grapefruit entering the fresh market by instituting weekly percentages 
for the first 22 weeks of the 2003-04 season. This rule continues 
established weekly percentages at 45 percent for weeks 1 and 2 
(September 15 through September 28, 2003), 35 percent for weeks 3 
through 19 (September 29, 2003, through January 25, 2004), and 40 
percent for weeks 20, 21, and 22 (January 26 through February 15, 
2004). The Committee recommended this action unanimously at a meeting 
on July 1, 2003. This action is similar to those taken the previous six 
seasons.
    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 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 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 the over shipment of smaller-sized red 
seedless grapefruit contributed to these poor returns for growers and 
to lower prices. 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 were maintained at around or below 250,000 cartons a 
week, prices would stabilize and demand for larger, more profitable 
sizes would increase. Consequently, in 1996, the Committee recommended 
changing its rules and regulations to establish the procedures in Sec.  
905.153 to limit the volume of small red seedless grapefruit entering 
the market. The Committee has successfully used the provisions of Sec.  
905.153 to address the problems associated with the over shipment of 
small red seedless grapefruit, 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 
and 2002-03 seasons. Under percentage of size regulation, prices 
increased and movement stabilized when compared to seasons without 
regulation.
    The Committee believes for the 2003-04 season small-sized red 
seedless grapefruit will negatively impact the market for all 
grapefruit if not regulated. By regulating the volume of small sizes 
entering the fresh market for the first 22 weeks of the season, 
shipments of sizes 48 and 56 can be maintained near the 250,000-carton 
per week level. 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 2003-04 season.
    In making its recommendation, the Committee considered the success 
of previous percentage of size regulations and their experience from 
past seasons. At the meeting, the Committee reviewed the results of a 
study commissioned to determine the merit of percentage of size 
regulation. The study completed by Robert E. Barber, Jr., Director of 
Economics, Florida Citrus Mutual, entitled ``An Econometric Spatial 
Equilibrium Analysis of the 48/56 Red Grapefruit Rule,'' dated July 1, 
2003, evaluated the effectiveness of past percentage of size 
regulation.
    One of the Committee's goals in establishing percentage of size 
regulation was to stabilize prices and increase returns. The Committee 
believes percentage of size regulation has been effective in this area, 
and the study shows this to be true. The study estimates that 
percentage of size regulation has increased total f.o.b. revenues for 
red grapefruit by a total of 12 percent or $18.9 million over the six-
year period from 1997-98 to 2002-03, averaging $3.15 million per 
season. Each of the six seasons had an increase in f.o.b. revenues 
ranging from a low of $2.52 million during the 1999-2000 season to a 
high of $3.73 million for the 2002-03 season. The f.o.b. prices per 
carton are also estimated to have increased by an average of 17 percent 
or $1.00 per carton during this six-year period.
    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 
six seasons utilizing percentage of size regulation, red seedless 
grapefruit maintained higher prices throughout the season with a 
weighted average f.o.b. price of $8.10 per carton in October, $7.06 per 
carton in December, and remained at around $6.90 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 six years compared to $5.83 
for the three years prior to using percentage of size regulation. The 
Barber study shows that prices for the past six seasons would have been 
from around $0.72 to $1.00 lower per carton without regulation.
    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 $4.42 for the seasons 1997-98 through 2001-
02 with percentage of size regulation compared to $3.08 for the three 
years prior to regulation.
    The University of Florida, Citrus Research and Education Center 
published an estimated cost of production for grapefruit for the 2001-
2002 season. The cost to produce grapefruit for the fresh market was 
estimated at $1,008.77 per acre for the Indian River area, the major 
grapefruit production area in Florida. Indian River grapefruit 
production has averaged around 417 boxes per acre. Based on the cost of 
production, and 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 $2.42 per box in order to break even. For 
the three seasons prior to percentage of size regulation, the total on-
tree value averaged $1.78 per box. Comparatively, for the seasons with 
regulation, 1997-98 through 2001-02, the on-tree value has averaged 
$2.45 per box for Indian River grapefruit.
    Small growers have struggled the last eight seasons to receive 
returns near the cost of production. For many, the higher on-tree 
returns produced under percentage of size regulation have meant the 
difference between profit and loss.
    Another of the Committee's goals in establishing percentage of size

[[Page 64496]]

regulation was to help maintain the price differential between the 
prices for larger sizes and those for smaller sizes. At the start of 
the season, larger-sized fruit command a premium price. The f.o.b. 
price can be $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 the smaller 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 and dropped to $1.68 by mid-December. In the six years 
with percentage of size regulation, the average differential between 
the carton price for a size 27 and a size 56 was $5.43 at the end of 
October, $3.78 in mid-December, and remained at around $3.10 the first 
week in May.
    The Barber study also states that f.o.b. revenues for larger sized 
red grapefruit benefited substantially from percentage of size 
regulation. Of the $18.9 million increase in total fresh f.o.b. 
revenues for red grapefruit the last six seasons, nearly $16.7 million 
can be attributed to gains made by fruit larger than sizes 48 and 56.
    According to the Economic Analysis and Program Planning Branch, 
USDA, 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. However, 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 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.
    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, Committee members concluded 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 last six seasons during the weeks regulated by a 
percentage of size regulation, weekly shipment of sizes 48 and 56 red 
seedless grapefruit remained near or below 250,000 cartons for nearly 
90 percent of the regulated weeks. Also, based on the Barber study, 
while percentage of size regulation has been successful in controlling 
the volume of small sizes entering the fresh market, it has had only a 
limited effect on total shipments.
    In addition, an economic study by Florida Citrus Mutual (Lakeland, 
Florida) dated April 1998, also found that the 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 also registering 
modest improvements. The rule shifted the size distribution toward the 
higher-priced, larger-sized grapefruit, which helped raise average 
f.o.b. prices. It further stated that sizes 48 and 56 accounted for 
only 17 percent of domestic shipments during the same period in the 
1997-98 season, as small sizes were used to supply export customers 
with preferences for small-sized grapefruit.
    In addition to the success of past regulations, there are other 
circumstances warranting the consideration of establishing percentage 
of size regulation. For the three seasons, 1999-2000, 2000-01, and 
2001-02, the percentage of the remaining crop represented by small 
sizes in February averaged around 53 percent. This compares to an 
average of 31 percent for the same month for seasons 1995-96 through 
1997-98. These three seasons, 1999-2000 through 2001-02, 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 
seven seasons prior to the 2002-03 season there has been a movement 
toward an increased volume of small sizes as a percentage of the 
overall crop. For the 2002-03 season, grapefruit sized larger than in 
the previous seasons and small sizes were not as dominant a factor. 
However, while the crop sized well throughout last season, it is 
unclear how the 2003-04 crop will size. It is possible that the 2003-04 
crop may produce the volume of small sizes represented in the majority 
of past seasons, making an even greater supply of small-sized fruit 
available for market.
    Problems with the European and Asian markets could also impact the 
volume of small sizes available. 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 upcoming season due to their 
weak economies. This could result in a greater amount of small sizes 
for remaining markets to absorb.
    The market for processed grapefruit is also a consideration. 
Approximately 48 percent of red seedless grapefruit is used for 
processing, with the majority being squeezed for juice. However, this 
outlet offers limited returns and is currently not profitable. Of the 
last six years, only 1999-2000 produced on-tree returns for processed 
red seedless grapefruit exceeding $1 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. 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.
    Statistics from the Florida Department of Citrus estimated that at 
the start of the current season over 35 weeks worth of grapefruit juice 
remained in inventory. Due to available inventories, on-tree prices for 
processed red seedless grapefruit for the 2003-04 season will most 
likely mirror prices from past seasons and remain below a dollar. A 
fair percentage of red seedless grapefruit shipped for processing are 
smaller sizes. With limited returns for processed grapefruit, an 
additional volume of small sizes could be shifted toward the fresh 
market, further aggravating problems with excessive volumes of small 
sizes.
    Further, red seedless grapefruit production continues to exceed 
demand. This has contributed to the low returns and led to economic 
abandonment. According to information from the National Agricultural 
Statistics Service, the seasons of 1995-96, 1996-97, 1997-98, 2000-01, 
and 2001-02 had an average economic abandonment of

[[Page 64497]]

two million boxes or more of red seedless grapefruit. Final data for 
the 2002-03 season will not be published until February 2004. However, 
it is likely some economic abandonment did occur last season.
    Economic abandonment and prices falling below the cost of 
production support the use of percentage of size regulation to control 
the volume of small sizes. The percentage of size regulation has a 
positive impact on price and is intended to make the most economically 
viable fruit available to the fresh market without oversupplying small-
sized fruit. The above considerations further support the need to 
control the volume of sizes 48 and 56 during the season to prevent 
small sizes from overwhelming all markets.
    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 establishing weekly percentages during the 
last six seasons has been effective and that problems successfully 
addressed by percentage of size regulation 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 for the 2003-04 season. The Committee recommended 
establishing weekly percentages 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 percentages for the 2003-04 season. They believe the 
percentages set last year worked well, and decided to make their 
initial recommendation for each of the 22 weeks at the same levels. 
Committee members believed setting last season's percentages higher 
than the most restrictive level allowed of 25 percent had worked well, 
providing some restriction while affording volume for those markets 
that prefer small sizes.
    Committee members believe if shipments of small sizes are 
maintained at around or below 250,000 cartons a week, prices stabilize 
and demand for larger, more profitable sizes increases. The Committee 
considered the 250,000-carton level when recommending the weekly 
percentages. The first two weeks were set at 45 percent because it was 
likely there would only be a limited volume shipped. In the last five 
seasons, total shipments of red seedless grapefruit have only exceeded 
250,000 cartons once in the first two weeks of the season.
    Setting weekly percentages at 35 percent for the majority of weeks 
provides a total allotment of 252,610 cartons (35 percent of the total 
industry base of 721,743 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 offers 
a little more allotment providing some transition to the period without 
regulation and helps to prevent the dumping of small sizes following 
the end of regulation. The Committee believes these percentages provide 
some flexibility while holding weekly shipments at sizes 48 and 56 
close to the 250,000-carton mark.
    The Committee recognized 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.
    Therefore, this rule continues the 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. This rule is intended to fully supply 
all markets for small sizes with fresh red seedless grapefruit sizes 48 
and 56, while avoiding oversupplying these markets to the detriment of 
grower revenues. The Committee plans to meet as needed during the 22-
week period to ensure weekly percentages are at the appropriate levels.
    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. 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 15, 2003. Each regulation week begins Monday at 12 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 2002-03 
season was approximately $7.24 per \4/5\-bushel carton, and total fresh 
shipments for the 2002-03 season are estimated at 22.9 million cartons 
of red grapefruit. Approximately 25 percent of all handlers handled 75 
percent of Florida's grapefruit shipments. Using the average f.o.b. 
price, at least 75 percent of the grapefruit handlers could be 
considered small businesses under SBA's definition. Therefore, the 
majority of

[[Page 64498]]

Florida grapefruit handlers may be classified as small entities. The 
majority of Florida grapefruit producers may also be classified as 
small entities.
    The overshipment of small-sized red seedless grapefruit contributes 
to poor returns and lower on-tree values. This rule continues to limit 
the volume of sizes 48 and 56 red seedless grapefruit shipped during 
the first 22 weeks of the 2003-04 season by establishing weekly 
percentages for each of the 22 weeks, beginning September 15, 2003. 
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 will help 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 
unanimously recommended this action at a meeting on July 1, 2003.
    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. The 
Barber study indicates spot picking will only fractionally increase 
harvesting costs on just a small segment of the boxes picked. 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 
227 loans and transfers were utilized last season. Statistics for 2002-
03 show that, in only 2 weeks of the regulated period was the total 
available allotment used. Therefore, with the weekly percentages for 
the 2003-04 season set at the same levels as last season, the overall 
impact of this regulation on total shipments should be minimal.
    The Committee believes establishing percentage of size regulation 
during the 2003-04 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 six seasons utilizing percentage of size 
regulation, red seedless grapefruit maintained higher prices throughout 
the season with a weighted average f.o.b. price of $8.10 per carton in 
October, to an average f.o.b. price of $7.06 per carton in December, 
and remained at around $6.90 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 six 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 $4.42 
for the seasons 1997-98 through 2001-02 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 provided by 
percentage of size regulation meant 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.
    The Barber study stated that prices rose anywhere from 12.9 percent 
or $.72 to 17.5 percent or $1.00 per \4/5\-bushel carton during 
percentage of size regulation. Even if this action were 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 when discussing this 
action. One alternative discussed was changing the way loans and 
transfers are handled. Another alternative discussed was changing the 
way allotment base is calculated. The Committee agreed both 
alternatives should first be thoroughly reviewed by the Regulation 
Subcommittee to consider options to bring before the full Committee. 
Therefore, these alternatives were 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 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

[[Page 64499]]

requirements and duplication by industry and public sectors.
    In addition, as noted in the initial regulatory flexibility 
analysis, 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 July 1, 2003, 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 9, 2003. 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 9, 2003. 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 (68 FR 53015) on September 9, 2003 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

0
Accordingly, the interim final rule amending 7 CFR part 905 which was 
published at 68 FR 53015, September 9, 2003, is adopted as a final rule 
without change.

    Dated: November 7, 2003.
A. J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 03-28520 Filed 11-13-03; 8:45 am]
BILLING CODE 3410-02-P