[Federal Register Volume 69, Number 59 (Friday, March 26, 2004)]
[Proposed Rules]
[Pages 15736-15740]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6704]


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

  Federal Register / Vol. 69, No. 59 / Friday, March 26, 2004 / 
Proposed Rules  

[[Page 15736]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 993

[Docket No. FV04-993-1 PR]


Dried Prunes Produced in California; Undersized Regulation for 
the 2004-05 Crop Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This rule invites comments on changes to the undersized 
regulation for dried prunes received by handlers from producers and 
dehydrators under Marketing Order No. 993 for the 2004-05 crop year. 
The marketing order regulates the handling of dried prunes produced in 
California and is administered locally by the Prune Marketing Committee 
(Committee). This rule would remove the smallest, least desirable of 
the marketable size dried prunes produced in California from human 
consumption outlets and allow handlers to dispose of the undersized 
prunes in such outlets as livestock feed. The Committee estimated that 
this rule would reduce the excess of dried prunes by approximately 
4,300 tons while leaving sufficient prunes to fulfill foreign and 
domestic trade demand.

DATES: Comments received by April 23, 2004, will be considered prior to 
issuance of a final rule.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this rule. Comments must be sent to the Docket Clerk, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW STOP 0237, Washington, DC 
20250-0237; fax: (202) 720-8938; or e-mail: [email protected]. 
or http://www.regulations.gov. All comments should reference the docket 
number and the date and page number of this issue of the Federal 
Register and will be made available for public inspection in the Office 
of the Docket Clerk during regular business hours, or can be viewed at: 
http://www.ams.usda.gov/fv/moab.html.

FOR FURTHER INFORMATION CONTACT: Richard P. Van Diest, Marketing 
Specialist, California Marketing Field Office, Marketing Order 
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 2202 
Monterey Street, suite 102B, Fresno, California 93721; telephone: (559) 
487-5901, fax: (559) 487-5906; or George Kelhart, Technical Advisor, 
Marketing Order Administration Branch, Fruit and Vegetable Programs, 
AMS, USDA, 1400 Independence Avenue, SW STOP 0237, Washington, DC 
20250-0237; telephone: (202) 720-2491, fax: (202) 720-8938.
    Small businesses may request information on complying with this 
regulation by contacting Jay Guerber, Marketing Order Administration 
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence 
Avenue, SW STOP 0237, Washington, DC 20250-0237; telephone: (202) 720-
2491, fax: (202) 720-8938, or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing 
Agreement and Order No. 993, both as amended (7 CFR part 993), 
regulating the handling of dried prunes produced in California, 
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.''
    The Department of Agriculture (USDA) is issuing this rule in 
conformance with Executive Order 12866.
    This proposal has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is not intended to have retroactive effect. 
This proposal 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.

Summary

    This proposal invites comments on changes to the undersized 
regulation in Sec.  993.49(c) of the prune marketing order for the 
2004-05 crop year for volume control purposes. The regulation removes 
prunes passing through specified screen openings. For French prunes, 
the screen opening would be increased from \23/32\ to \24/32\ of an 
inch in diameter; and for non-French prunes, the opening would be 
increased from \28/32\ to \30/32\ of an inch in diameter. This rule 
would remove the smallest, least desirable of the marketable size dried 
prunes produced in California from human consumption outlets. This rule 
would be in effect from August 1, 2004, through July 31, 2005, and was 
unanimously recommended by the Committee at a December 11, 2003, 
meeting.

Authority for Undersized Regulations as a Volume Control

    Section 993.19b of the prune marketing order defines undersized 
prunes as prunes, which pass freely through a round opening of a 
specified diameter.
    Section 993.49(c) of the prune marketing order establishes an 
undersized regulation of \23/32\ of an inch for French prunes and \28/
32\ of an inch for non-French prunes. These diameter openings have been 
in effect for quality control purposes. Section 993.49(c) also provides 
that the USDA upon a recommendation of the Committee may establish 
larger openings for undersized dried prunes whenever it is determined 
that supply conditions for a crop year warrant such regulation.
    Section 993.50(g) states in part: ``No handler shall ship or 
otherwise dispose of, for human consumption, the quantity of prunes 
determined by the inspection service pursuant to Sec.  993.49(c) to be 
undersized prunes.'' * * * Pursuant to Sec.  993.52 minimum standards, 
pack

[[Page 15737]]

specifications, including the openings prescribed in Sec.  993.49(c), 
may be modified by the USDA on the basis of a recommendation of the 
Committee or other information.
    Pursuant to the authority in Sec.  993.52 of the order, Sec.  
993.400 modifies the undersized prune openings prescribed in Sec.  
993.49(c) to permit undersized regulations using openings of \23/32\ or 
\24/32\ of an inch for French prunes and \28/32\ or \30/32\ of an inch 
for non-French prunes.

History of Undersized Regulations Used as a Volume Control

    During the 1974-75 and 1977-78 crop years, the undersized prune 
regulation was established by USDA at \23/32\ of an inch in diameter 
for French prunes and \28/32\ of an inch in diameter for non-French 
prunes. These diameter openings were established in Sec. Sec.  993.401 
and 993.404, respectively (39 FR 32733, September 11, 1974; and 42 FR 
49802, September 28, 1977). In addition, the Committee recommended and 
USDA established volume regulation percentages during the 1974-75 crop 
year with an undersized regulation at the aforementioned \23/32\ and 
\28/32\ inch diameter screen sizes. During the 1975-76 and 1976-77 crop 
years, the undersized prune regulation was established at \24/32\ of an 
inch for French prunes and \30/32\ of an inch for non-French prunes. 
These diameter openings were established in Sec. Sec.  993.402 and 
993.403, respectively (40 FR 42530, September 15 1975; and 41 FR 37306, 
September 3, 1976). The prune industry had an excess supply of prunes--
particularly small size prunes. Rather than recommending volume 
regulation percentages for the 1975-76, 1976-77, and 1977-78 crop 
years, the Committee recommended the establishment of an undersized 
prune regulation applicable to all prunes received by handlers from 
producers and dehydrators during each of those crop years.
    The objective of the undersized prune regulations during each of 
those crop years was to preclude the use of small prunes in 
manufactured prune products such as juice and concentrate. Handlers 
could not market undersized prunes for human consumption, but could 
dispose of them in nonhuman outlets such as livestock feed.
    With these experiences as a basis, the marketing order was amended 
on August 1, 1982, establishing the continuing quality-related 
regulation for undersized French and non-French prunes under Sec.  
993.49(c). That regulation has removed from the marketable supply those 
prunes which are not desirable for use in prune products.
    As in the 1970's, the prune industry is currently experiencing an 
excess supply of prunes, including the smaller sizes. During the 1998-
99 crop year, an undersized prune regulation was established at \24/32\ 
of an inch for French prunes, and \30/32\ of an inch for non-French 
prunes. These diameter openings were established in Sec.  993.405 (63 
FR 20058, April 23, 1998).
    With larger than desired carryin inventories and a 1999-2000 prune 
crop of about 172,000 natural condition tons, the Committee unanimously 
recommended continuing with an undersized prune regulation at \24/32\ 
of an inch in diameter for French prunes and \30/32\ of an inch in 
diameter for non-French prunes. These diameter openings were 
established in Sec.  993.406 (64 FR 23759, May 4, 1999) and made 
effective from August 1, 1999, through July 31, 2000, or until the 
undersized prunes from that crop year were disposed of as required.
    Because carryin inventories were larger than desired and the 2000-
01 prune crop was expected to be about 203,000 natural condition tons, 
the Committee unanimously recommended continuing with an undersized 
prune regulation at \24/32\ of an inch in diameter for French prunes 
and \30/32\ of an inch in diameter for non-French prunes. These 
diameter openings were established in Sec.  993.407 (65 FR 29945, May 
10, 2000) and made effective from August 1, 2000, through July 31, 
2001, or until the undersized prunes from that crop were disposed of as 
required.
    Because supplies were expected to remain excessive in 2001-02, the 
Committee again unanimously recommended continuing with an undersized 
prune regulation at \24/32\ of an inch in diameter for French prunes 
and \30/32\ of an inch in diameter for non-French prunes. These 
diameter openings were established in Sec.  993.408 (66 FR 30642, June 
7, 2001) and made effective from August 1, 2001, through July 31, 2002, 
or until the undersized prunes are disposed of under the marketing 
order.
    With supplies expected to remain excessive in 2002-03, the 
Committee again unanimously recommended continuing with an undersized 
prune regulation at \24/32\ of an inch in diameter for French prunes 
and \30/32\ of an inch in diameter for non-French prunes. These 
diameter openings were established in Sec.  993.409 (67 FR 31717, May 
10, 2002) and made effective from August 1, 2002, through July 31, 
2003, or until the undersized prunes are disposed of under the 
marketing order.
    Because supplies were not expected to remain excessive in 2003-04, 
the Committee did not recommend continuing with the undersized 
regulation from August 1, 2003 through July 31, 2004.
    For the 1998-99 crop year, the carryin inventory level reached a 
record high of 126,485 natural conditions tons. Excessive inventories 
tend to dampen producer returns, and cause weak marketing conditions. 
The carryin for the 1999-2000 crop year was reduced to 59,944 natural 
condition tons. This reduction was due to the low level of salable 
production in 1998-99 (about 102,521 natural condition tons and 50 
percent of a normal size crop) and the undersized prune regulation. The 
carryin for the 2000-01 crop year increased to 65,131 natural condition 
tons. This increase was due to a larger 1999-2000 crop size of about 
171,754 natural condition tons and reduced shipments during the 1999-
2000 crop year. The carryin for the 2001-02 crop year increased to 
100,829 natural condition tons. This increase was due to a larger 2000-
01 crop size of about 214,803 natural condition tons and a modest 
increase in shipments from a severely reduced shipment base during the 
1999-2000 crop year. The carryin for the 2002-03 crop year decreased to 
63,536 natural condition tons. This decrease was due to a smaller 2001-
02 crop size of about 142,151 natural condition tons and a modest 
decrease in shipments from the shipment base during the 2000-01 crop 
year.
    According to the Committee, the desired inventory level to keep 
trade distribution channels full while awaiting the new crop has ranged 
between 35,353 and 42,071 natural condition tons since the 1996-97 crop 
year while the actual inventory has ranged between 59,944 and 126,485 
natural condition tons since that year. The desired inventory level for 
early season shipments fluctuates from year-to-year depending on market 
conditions.
    At its meeting on December 11, 2003, the Committee unanimously 
recommended continuing an undersized prune regulation at \24/32\ of an 
inch in diameter for French prunes and \30/32\ of an inch in diameter 
for non-French prunes during the 2004-05 crop year for supply 
management purposes. This regulation would be in effect from August 1, 
2004, through July 31, 2005, or until the undersized prunes from 2004-
05 are properly disposed of as required under the marketing order.
    The Committee estimated that there would be an excess of about 
25,925 natural condition tons of dried prunes as of July 31, 2004. This 
proposed rule

[[Page 15738]]

would remove primarily small-sized prunes from human consumption 
channels, consistent with the undersized prune regulation that was 
implemented for the 1998-99, 1999-2000, 2000-01, 2001-02, and 2002-03 
crop years. As mentioned earlier, an undersized prune regulation was 
not implemented last crop year (2003-04). It is estimated that 
approximately 4,300 natural condition tons of small prunes would be 
removed from human consumption channels during the 2004-05 crop year as 
a result of this rule. This would leave sufficient prunes to fill 
domestic and foreign trade demand during the 2004-05 crop year, and 
provide an adequate carryout on July 31, 2005, for early season 
shipments until the new crop is available for shipment. According to 
the Committee, the desired inventory level to keep trade distribution 
channels full while awaiting the 2004-05 crop is about 39,000 natural 
condition tons.
    In its deliberations, the Committee reviewed statistics reflecting: 
(1) A worldwide prune demand which has been relatively stable at about 
260,000 tons; (2) a worldwide oversupply that is expected to continue 
growing this decade (estimated at 305,115 natural condition tons by the 
year 2007); (3) a continuing oversupply situation in California caused 
by decreased shipments and continued large production from the 
plantings during the 1990's with higher yields per acre (between the 
1990-91 and 2000-01 crop years, the yields ranged from 1.2 to 2.6 
versus a 10-year average of 2.1 tons per acre); (4) California's 
continued excess inventory situation; and (5) low producer prices.
    The production of these small sizes ranged from 1,335 to 8,778 
natural condition tons during the 1991-92 through the 2002-03 crop 
years. The Committee concluded that it has to resume utilizing the 
undersized prune volume regulation in order to accelerate the return to 
a more balanced supply/demand situation in the interest of the 
California dried prune industry. In addition, the Committee supported 
other efforts to reduce burdensome supplies through an industry-funded 
tree removal program that was initiated in the fall of 2001. Through 
this program, over 4,700 bearing acres of prune plum trees were 
removed. At the request of the Committee, the USDA implemented a USDA 
funded tree removal program, wherein growers would be encouraged to 
remove prune plum trees. Through the USDA tree removal program, 13,248 
bearing acres of prune plums were removed. While the industry 
successfully removed over 18,000 bearing acres of prune plum trees 
through the USDA and industry tree removal programs, prune production 
still exceeds demand.
    Adding to the U.S. oversupply of prunes are imports of prune juice, 
which increased by 45 percent last year. The proposed change to the 
undersized regulation for the 2004-05 crop year will help bring 
supplies more in line with market needs.
    Despite these supply management efforts, the industry's oversupply 
plight may continue over the next few years due to new prune plantings 
in recent years with higher yields per acre. These plantings have a 
higher tree density per acre than the older prune plantings. During the 
1990-91 crop year, the non-bearing acreage totaled 5,900 acres; but by 
1998-99, the non-bearing acreage had quadrupled to more than 26,000 
acres. The non-bearing acreage has subsequently been reduced to 9,000 
acres during the 2002-03 crop year. The 1996-97 through 2003-04 yields 
have ranged from 1.3 to 2.6 tons per acre. Over the last 10-years, the 
average was 2.3 tons per acre.
    The 2003-04 dried prune crop is reported at 176,000 natural 
condition tons by the National Agricultural Statistics Service (NASS). 
The Committee is expecting another large crop of prunes during the 
2004-05 crop year because of new bearing acreage coming into production 
and higher average yields.
    Since the late 1990's, producers have not been able to recover the 
costs of drying, hauling, and paying the State of California producer 
promotion expenses on every ton of size \24/32\ diameter dried prunes 
they delivered. The 1997-98 crop year producer prices for \24/32\ of an 
inch in diameter French prunes were about $40-$50 per ton. This is 
about $260-$270 per ton below the cost of drying a ton of \24/32\ 
diameter French prunes at a 4 to 1 dry-away ratio, the cost of hauling 
the prune/plums from the orchard to the dehydrator, and the assessments 
paid by producers under the California marketing order for promotion. 
During the 2003-04 crop year, producer prices are expected to be about 
$40 per ton for the \24/32\ of an inch diameter French prunes, which is 
about $249 per ton below the cost of drying, hauling, and State 
promotion expenses. Low producer prices for all sizes of dried prunes 
are expected to continue until the prune supply and demand come more 
closely into alignment.
    The intent of this proposal is to eliminate small sizes which have 
limited economic value, help reduce excess prune inventories, and to 
improve producer returns. Average producer returns currently are below 
the cost of production and the proposal would assist in enhancing 
returns.
    The 1998-99, 1999-2000, 2000-01, 2001-02 and 2002-03 undersized 
prune rules of \24/32\ of an inch for French prunes and \30/32\ of an 
inch for non-French prunes have expedited the reduction of small prune 
inventories, but more needs to be done to bring supplies into balance 
with market demand. The excess inventory on July 31, 2003, was 32,619 
natural condition tons. As noted earlier, during the 2003-04 crop year, 
the Committee did not implement an undersized prune volume regulation. 
The Committee believes that the same undersized prune regulation that 
was implemented for the 1998-99, 1999-2000, 2000-01, 2001-02 and 2002-
03 crop years should be implemented during the 2004-05 crop year to 
continue reducing the inventories of small prunes, to help reduce the 
expected large 2004-05 prune crop, and more quickly bring supplies in 
line with demand. Attainment of this goal would benefit all of the 
producers and handlers of California prunes.
    The recommended decision of June 1, 1981 (46 FR 29271) regarding 
undersized prunes states that the undersized prune regulation at the 
\23/32\ and \28/32\ inch diameter size openings would be continuous for 
the purposes of quality control even in above parity situations. It 
further states that any change (i.e. increase) in the size of those 
openings would not be for the purpose of establishing a new quality-
related minimum. Larger openings would only be applicable when supply 
conditions warranted the regulation of a larger quantity of prunes as 
undersized prunes. Thus, any regulation prescribing openings larger 
than those in Sec.  993.49(c) should not be implemented when the grower 
average price is expected to be above parity. The season average price 
received by prune growers ranged from 32 percent to 54 percent of 
parity during the 1995 through 2002 seasons. As discussed later, the 
average grower price for prunes during the 2004-05 crop year is not 
expected to be above parity, and implementation of this more 
restrictive undersized regulation would be appropriate in reference to 
parity.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this rule on small entities. Accordingly, AMS has 
prepared this initial regulatory flexibility analysis.

[[Page 15739]]

    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 1,100 producers of dried prunes in the 
production area and approximately 22 handlers subject to regulation 
under the marketing order. Small agricultural producers are defined by 
the Small Business Administration (13 CFR 121.201) as those having 
annual receipts of less than $750,000, and small agricultural service 
firms are defined as those whose annual receipts are less than 
$5,000,000.
    An updated industry profile shows that 8 out of 22 handlers (36.4 
percent) shipped over $5,000,000 worth of dried prunes and could be 
considered large handlers by the Small Business Administration. 
Fourteen of the 22 handlers (63.6 percent) shipped under $5,000,000 
worth of prunes and could be considered small handlers. An estimated 32 
producers, or less than 3 percent of the 1,100 total producers, would 
be considered large growers with annual incomes over $750,000. The 
majority of handlers and producers of California dried prunes may be 
classified as small entities.
    As recommended by the Committee, this proposed rule would establish 
an undersized prune regulation of \24/32\ of an inch in diameter for 
French prunes and \30/32\ of an inch in diameter for non-French prunes 
for the 2004-05 crop year for volume control purposes. This change in 
regulation would result in more of the smaller-sized prunes being 
classified as undersized prunes and is expected to benefit producers, 
handlers, and consumers. The larger screen openings that were in place 
for 2002-03 are the same as proposed for 2004-2005 and are expected to 
remove 4,300 tons of dried prunes from the excess marketable supply.
    The Committee estimates carryout inventories on July 31, 2004, to 
be 64,626 tons. This is 25,925 tons greater than desirable carryout 
inventories. This amount of inventory reflects a serious supply-demand 
imbalance in the industry. In addition, average 2003-04 grower prices 
are reported at $730 per ton by NASS and are lower than for the 2002-03 
year, when growers received an average of $810 per ton. The $730 
average grower price is substantially below total cost of production of 
$1,141 per ton and the total variable cost of production of $838 per 
ton, based on a 2001 study by the University of California Cooperative 
Extension reflecting a 2.5 ton production per acre in Sacramento 
County.\1\ This means that most producers may not be earning sufficient 
returns to cover fixed costs. Some producers will continue to operate 
in the short run as long as prices are above variable costs, but others 
will begin to cease production in the longer run if prices do not 
recover to levels above total variable costs.
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    \1\ The study was prepared by Richard P. Buchner, John P. 
Edstrom, William H. Krueger, William H. Olson, Wilbur O. Reil, Karen 
M. Klonsky, and Richard L. DeMoura.
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    Tree removal programs (industry and federal) have been implemented 
by the industry. These programs have been successful in removing over 
18,000 bearing acres from production, thus reducing marketable 
production. Even with these tree removal programs, total available 
supply is estimated at 224,626 tons for the 2004-05 crop year 
(marketable production estimated at 160,000 tons and 64,626 tons of 
carryin inventories). Total demand is estimated to not exceed 167,769 
tons, resulting in carryout inventories of 56,857 tons. This remains in 
excess of desirable inventories of 39,000 tons.
    Inventories of this magnitude have a significant depressing impact 
on grower payments. Growers do not receive payments until inventories 
are completely sold. The costs of maintaining these inventories are 
deducted from grower payments.
    An undersized prune regulation would remove about 4,300 tons from 
the total available supply. An econometric model shows that an 
undersized prune rule resulting in eliminating 4,300 tons from 
marketable production would strengthen growers' prices modestly by 
$7.59 per ton. This price is still expected to be less than the cost of 
production for 2004-2005 estimated at $1,141 per ton.
    Because the benefits and costs of the proposed action would be 
directly proportional to the quantity of \24/32\ screen French prunes 
and \30/32\ screen non-French prunes produced or handled, small 
businesses should not be disproportionately affected by the proposal. 
While variation in sugar content, prune density, and dry-away ratio 
vary from county to county, they also vary from orchard to orchard and 
season to season. In the major producing areas of the Sacramento and 
San Joaquin Valleys (which account for over 99 percent of the State's 
production), the prunes produced are homogeneous enough that the 
proposal should not be viewed as inequitable by large and small 
producers in any area of the State.
    The quantity of small prunes in a lot is not dependent on whether a 
producer or handler is small or large, but is primarily dependent on 
cultural practices, soil composition, and water costs. The cost to 
minimize the quantity of small prunes is similar for small and large 
entities. The anticipated benefits of this rule are not expected to 
disproportionately impact small handlers or producers. The only 
additional costs on producers and handlers expected from the increased 
openings would be the disposal of additional tonnage (now estimated to 
be about 4,300 tons) to nonhuman consumption outlets. These costs are 
expected to be minimal and would be offset by the benefits derived by 
the elimination of some of the excess supply of small-sized prunes.
    At the December 11, 2003, meeting, the Committee discussed the 
financial impact of this change on handlers and producers. Handlers and 
producers receive higher returns for the larger size prunes. Prunes 
eliminated through the implementation of this rule have very little 
value. As mentioned earlier, the current situation for producers is 
quite bleak with producers expecting to lose $249 on every ton of 
small-sized prunes delivered to handlers during the 2004-05 crop year. 
Producer prices for \24/32\ screen French prunes are expected to be $40 
per ton for the 2003-04 crop year. The cost of drying a ton of such 
prunes is $260 per ton with a 4 to 1 dry-away ratio, transportation 
from the orchard to the dehydrator is at least $20 per ton, and the 
producer assessment paid to the California Prune Board (a body which 
administers the State marketing order for promotion) is $9.33 per ton 
for a total cost of about $289.33 per ton. Thus, a producer could save 
about $249 per ton by not drying prune plums and not delivering dried 
prunes \24/32\ of an inch in diameter to handlers.
    Utilizing data provided by the Committee, USDA has evaluated the 
impact of the proposed undersized regulation change upon producers and 
handlers in the industry. The analysis shows that a reduction in the 
marketable production and handler inventories could result in higher 
season-average prices, which would benefit all producers. The removal 
of the smallest, least desirable of the marketable dried prunes 
produced in California from human consumption outlets would eliminate 
an estimated 4,300 tons of small-sized dried prunes during the 2004-05 
crop year from the

[[Page 15740]]

marketplace. This would help lessen the negative marketing and pricing 
effects resulting from the excess inventory situation facing the 
industry. California prune handlers reported that they held 71,320 tons 
of natural condition prunes on July 31, 2003, the end of the 2002-03 
crop year. The 71,320 ton year-end inventory is larger than what is 
desired for early season shipments by the prune industry. The desired 
inventory level is based on an average 12-week supply to keep trade 
distribution channels full while awaiting new crop dried prunes. 
Currently, it is about 39,000 natural condition tons. This leaves a 
2003-04 inventory surplus of about 32,000 tons. The undersized 
regulation will help reduce the surplus, but the anticipated large 
2004-05 prune crop is expected to continue the supply imbalance.
    As the marketable dried prune production and surplus prune 
inventories are reduced through this proposal, and producers continue 
to implement improved cultural and thinning practices to produce 
larger-sized prunes, continued improvement in producer returns is 
expected.
    For the 1994-95 through the 2002-2003 crop years, the season 
average price received by the producers ranged from a high of $1,040 
per ton in the 1995-1996 crop year to a low of $726 per ton during the 
2001-02 crop year. The season average price received by producers 
during that 7-year period ranged from 32 percent to 54 percent of 
parity. Based on the latest available data, the season average producer 
price for the 2004-05 season is expected to be near the 2003-04 
season's price, which is projected to be $730 per ton.
    The Committee discussed alternatives to this change, including 
making no changes to the undersized prune regulation and allowing 
market dynamics to foster prune inventory adjustments through lower 
prices on the smaller prunes. While reduced grower prices for small 
prunes are expected to contribute toward a slow reduction in dried 
prune inventories, the Committee believed that the undersized rule 
change is needed to accelerate that reduction. A second alternative 
discussed was to advance to a \25/32\ screen undersized regulation for 
French prunes. However, handlers expressed concern that this would 
reduce the amount of manufacturing prunes (approximately 4,000 tons) 
available for the manufacture of prune juice and concentrate. This 
could increase the prices of these products. The first initiative was 
not supported because it would not specifically eliminate the smallest, 
least valuable prunes, which are in oversupply.
    This action would not impose any additional reporting or 
recordkeeping requirements on either small or large California dried 
prune handlers. 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.
    The Department has not identified any relevant Federal rules that 
duplicate, overlap or conflict with this proposed rule.
    In addition, the Committee's meeting was widely publicized 
throughout the prune industry and all interested persons were invited 
to attend the meeting and participate in Committee deliberations on all 
issues. Like all Committee meetings, the December 11, 2003, meeting was 
a public meeting and all entities, both large and small, were able to 
express views on this issue. The Committee itself is composed of 
twenty-two members. Seven are handlers, fourteen are producers, and one 
is a public member. Moreover, the Committee and its Supply Management 
Subcommittee are monitoring the supply situation, and this proposed 
rule reflects their deliberations. Finally, interested persons are 
invited to submit information on the regulatory and informational 
impacts of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance 
guide should be sent to Jay Guerber at the previously mentioned address 
in the FOR FURTHER INFORMATION CONTACT section.
    The Committee requested a comment period through April 23, 2004, to 
allow interested persons to respond to this proposal. This comment 
period should give the Committee time to observe the bloom period 
during the spring and industry shipment trends during the year and 
allow sufficient time to comment to the Department concerning any 
changes that are deemed appropriate. All written comments timely 
received will be considered before a final determination is made on 
this matter.

List of Subjects in 7 CFR Part 993

    Marketing agreements, Plums, Prunes, Reporting and recordkeeping 
requirements.

    For the reasons set forth in the preamble, 7 CFR part 993 is 
proposed to be amended as follows:

PART 993--DRIED PRUNES PRODUCED IN CALIFORNIA

    1. The authority citation for 7 CFR part 993 continues to read as 
follows:

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


Sec.  993.409  [Removed]

    2. Section 993.409 is removed.
    3. A new Sec.  993.410 is added to read as follows:


Sec.  993.410  Undersized prune regulation for the 2004-05 crop year.

    Pursuant to Sec. Sec.  993.49(c) and 993.52, an undersized prune 
regulation for the 2004-05 crop year is hereby established. Undersized 
prunes are prunes which pass through openings as follows: for French 
prunes, \24/32\ of an inch in diameter; for non-French prunes, \30/32\ 
of an inch in diameter.

    Dated: March 19, 2004.
A. J. Yates,
Administrator, Agriculture Marketing Service.
[FR Doc. 04-6704 Filed 3-25-04; 8:45 am]
BILLING CODE 3410-02-P