[Federal Register Volume 69, Number 157 (Monday, August 16, 2004)]
[Rules and Regulations]
[Pages 50269-50275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-18607]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV04-905-3 IFR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Limiting the Volume of Small Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule limits 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 2004-05 season by establishing weekly percentages 
beginning September 20, 2004. 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.

DATES: Effective August 17, 2004; comments received by September 15, 
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, E-mail: [email protected], or 
Internet: 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: 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.''
    The Department of Agriculture (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 the 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

[[Page 50270]]

weeks of the 2004-05 season by establishing a weekly percentage for 
each week, beginning September 20, 2004. 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.
    A typical season runs from September through June. It can run 
longer if there is a strong demand for fresh grapefruit. During the 
first 22 weeks of a typical season there is an oversupply of small red 
seedless grapefruit and a reduced demand for such fruit. Later in the 
season, there is a greater demand for smaller sizes. As discussed later 
in more detail, this action is intended to stabilize the early season 
(22-week) supply of small red seedless grapefruit and to help improve 
the prices received by producers. In the absence of this action, 
producer prices may be lower than their cost of production.
    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. In past seasons, handlers could calculate the 
total volume of sizes 48 and 56 they could ship in a regulated week by 
taking the recommended weekly percentage times the average weekly 
volume of red seedless grapefruit handled by such handler in the 
previous five seasons. However, under a separate interim final rule, 
USDA is changing the number of seasons used to determine a handler's 
average week from the five previous seasons to the three previous 
seasons. This interim final rule also appears in this issue of the 
Federal Register.
    This interim final 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 instituting weekly 
percentages for the first 22 weeks of the 2004-05 season. This rule 
establishes weekly percentages at 45 percent for the first three weeks 
(September 20, 2004 through October 10, 2004), 36 percent for weeks 4 
through 18 (October 11, 2004 through January 23, 2005), 40 percent for 
weeks 19 and 20 (January 23, 2005 through February 6, 2005), and 45 
percent for weeks 21 and 22 (February 7, 2005 through February 20, 
2005). The Committee recommended this action unanimously at a meeting 
on June 15, 2004. This action is similar to those taken the previous 
seven seasons.
    The Committee believes that 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 that 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 the larger, more profitable 
sizes would increase. Consequently, in 1996, the Committee recommended 
changing their 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, 2002-03, and the 2003-04 seasons. Under percentage of size 
regulation, prices increased and movement stabilized when compared to 
seasons without regulation. Examples of these positive changes follow.
    The Committee believes that for the 2004-05 season small-sized red 
seedless grapefruit would again 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 
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 week of the 22 week 
regulatory period for the 2004-05 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 referenced 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 
regulations.
    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,

[[Page 50271]]

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 
seven seasons utilizing percentage of size regulation, red seedless 
grapefruit maintained higher prices throughout the season with a 
weighted average f.o.b. price of $8.26 per carton in October, $7.12 per 
carton in December, and remained at around $7.09 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 $7.10 for the last seven years compared to 
$5.83 for the three years prior to using percentage of size regulation. 
The Barber study shows that prices for the seasons 1997-98 to 2002-03 
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 $4.86 for the seasons 1998-99 through 2002-
03 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 2002-
2003 season. The cost to produce grapefruit for the fresh market was 
estimated at $1,072.54 per acre for the Indian River area, the major 
grapefruit production area in Florida. Indian River grapefruit 
production ranges from 325 boxes per acre to 525 boxes per acre and 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 $2.55 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, 
1998-99 through 2002-03, the on-tree value has averaged $2.63 per box 
for red grapefruit, which is just above the estimated $2.55 per box 
break-even level.
    Small growers have struggled the last ten 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 
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. For 
2003-04, the f.o.b. price for a size 27 averaged $12.38 per carton in 
October 2003. This compares to an average f.o.b. price of around $6.38 
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 seven years 
with percentage of size regulation, the average differential between 
the carton price for a size 27 and a size 56 was $5.51 at the end of 
October, $3.83 in mid-December, and remained at around $3.36 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 seven 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 
80 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 affect 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 four seasons, 1999-2000, 2000-01, 2001-02, 
and 2002-03 the percentage of the remaining crop represented by small 
sizes in February averaged around 45 percent. This compares to an 
average of 31

[[Page 50272]]

percent for the same month for seasons 1995-96 through 1997-98. These 
five seasons, 1999-2000 through 2003-04, 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, the 2003-04 
season red grapefruit produced a greater number of sizes 48 and 56 red 
grapefruit than anticipated. The September official measurement of red 
seedless grapefruit indicated that 91 pieces of grapefruit were 
required for a box. The November measurements indicated that it would 
take 100 pieces of grapefruit to make a box. Currently, it is unclear 
how the 2004-05 crop will size. It is possible that the 2004-05 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.
    European and Asian markets also impact the volume of small sizes 
available. These markets have shown a strong demand for the smaller-
sized red seedless grapefruit. The increase in the value of currency in 
these markets compared to the dollar resulted in more shipments of 
smaller-sized red seedless grapefruit to these markets. However, a 
reduction in shipments to these areas could occur during the coming 
season if market conditions change. 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 45 percent of red seedless grapefruit was used for 
processing in 2002-03, with the majority being squeezed for juice. 
However, this outlet offers limited returns and is currently not 
profitable. Of the last seven years, only 1999-2000 produced on-tree 
returns for processed red seedless grapefruit exceeding $1 per box. 
Returns for 2002-03 processed red seedless grapefruit averaged a 
negative $0.68 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 1998 through 2003, the differential 
between fresh prices and processed prices has averaged $4.43 per box. 
Consequently, growers prefer to ship grapefruit to the fresh market.
    Statistics from the Florida Department of Citrus show there is 
currently a 42-week inventory of red seedless grapefruit juice from 
last season. By the start of the season, it is projected that over 36 
weeks worth of juice will remain in inventory. Due to current 
inventories, on-tree prices for processed red seedless grapefruit for 
the 2004-05 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 two million boxes or 
more of red seedless grapefruit. Data available for the 2002-03 season 
is preliminary, however, it is likely some economic abandonment did 
occur.
    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 seven 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 2004-05 season. The Committee recommended 
establishing weekly percentages at 45 percent for the first three 
weeks, 36 percent for weeks 4 through 18, 40 percent for weeks 19 and 
20, and 45 percent for weeks 21 and 22.
    The Committee considered the percentages set last year as a basis 
for discussing percentages for the 2004-05 season. They believe the 
percentages set last year worked well, and decided to make their 
initial recommendation for each of the 22 weeks at similar levels. 
There was a need to increase percentages in the final weeks of 
regulation for 2003-04. Consequently, the committee recommended 
increased percentages for the last few weeks in 2004-05 in the event 
the same conditions occur. 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 three weeks are set at 45 percent because it is 
likely there will 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 three weeks of the season.
    Setting weekly percentages at 36 percent for the majority of weeks 
provides a total allotment of 249,294 cartons (36 percent of the total 
industry base of 653,424 cartons) per week. This will help hold 
shipments of sizes 48 and 56 red seedless grapefruit near the 250,000-
carton level for the greater part of the season. The increase to 40 
percent for weeks 19 and 20 and 45 percent for weeks 21 and 22 offers a 
little more allotment, provides 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 of sizes 48 and 56 
close to the 250,000-carton mark.
    More information helpful in determining the appropriate weekly 
percentages will be available after August. At the time of the June 
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 not to be issued 
until October. Further, the first reports on how the crop is sizing 
will not be available until after September. Consequently, the 
Committee believes it is best to set regulation at these levels, and 
then relax the percentages later in the season if conditions warrant.
    The Committee recognized they could meet again during the 
regulation period, as needed, and use the most current

[[Page 50273]]

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 establishes weekly percentages at 45 percent 
for the first three weeks, 36 percent for weeks 4 through 18, 40 
percent for weeks 19 and 20, and 45 percent for weeks 21 and 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 begins the third Monday in September, 
September 20, 2004. 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.

Initial Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA), the Agricultural Marketing Service (AMS) has considered the 
economic impact of this action on small entities. Accordingly, AMS has 
prepared this initial regulatory flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
business subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and 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 2003-04 
season was approximately $7.58 per \4/5\-bushel carton, and total fresh 
shipments for the 2003-04 season are estimated at 24.7 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 80 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 due to the 
production of red seedless grapefruit in excess of demand. This rule 
limits the volume of sizes 48 and 56 red seedless grapefruit shipped 
during the first 22 weeks of the 2004-05 season by establishing weekly 
percentages for each of the 22 weeks, beginning September 20, 2004. 
This rule sets the weekly percentages at 45 percent for weeks 1, 2, and 
3, 36 percent for week 4 through week 18, and at 40 percent for weeks 
19 and 20, and 45 percent for weeks 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 June 15, 2004.
    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 would 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 estimated 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 
314 loans and transfers were utilized last season. Statistics for 2003-
04 show that, in only 3 weeks of the regulated period was the total 
available allotment used. Therefore, with the weekly percentages for 
the 2004-05 season set at approximately 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 2004-05 season will have benefits

[[Page 50274]]

similar to those realized under past regulations. Handlers and 
producers have received higher returns under percentage of size 
regulation than without 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 seven seasons utilizing percentage of size 
regulation, red seedless grapefruit maintained higher prices throughout 
the season with a weighted average f.o.b. price of $8.26 per carton in 
October, to an average f.o.b. price of $7.12 per carton in December, 
and remained at around $7.09 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 
$7.10 for the last seven years compared to $5.83 for the three prior 
years to using the percentage of size regulation. The Barber study 
estimates that prices for the seasons 1997-98 to 2002-03 would have 
been from around $0.72 to $1.00 lower per carton without regulation.
    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 $4.86 
for the seasons 1998-99 through 2002-03 with percentage of size 
regulation, compared to $3.08 for the three years prior to regulation. 
Small growers have struggled the last nine 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 estimates 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. The Committee discussed recommending percentages for only the 
first few weeks and meeting in the fall to recommend the percentages 
for the remaining weeks. This option was rejected as most members 
wished to know their volumes for the entire season. The Committee also 
believes its recommendations on percentages for all 22 weeks have been 
effective. The Committee also discussed setting higher percentages for 
the last few weeks of regulation. The Committee agreed that the 
percentages would be reexamined when more complete data was available 
and changed if necessary. The Red Grapefruit subcommittee would meet 
during the 2004-05 season to examine the rule and the percentages, and 
could recommend adjustments at that time. Therefore, this alternative 
was 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 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 June 15, 2004, meeting was a public meeting and 
all entities, both large and small, were able to express views on this 
issue. 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.
    This rule invites comments on limiting the volume of small red 
seedless grapefruit entering the fresh market during the first 22 weeks 
of the 2004-05 season. Any comments received will be considered prior 
to finalization of this rule.
    After consideration of all relevant material presented, including 
the Committee's recommendation, and other information, it is found that 
this interim final rule, as hereinafter set forth, will tend to 
effectuate the declared policy of the Act.
    Pursuant to 5 U.S.C. 553, it is also found and determined upon good 
cause that it is impracticable, unnecessary, and contrary to the public 
interest to give preliminary notice prior to putting this rule into 
effect and that good cause exists for not postponing the effective date 
of this rule until 30 days after publication in the Federal Register 
because: (1) This rule needs to be in place when the regulatory period 
begins September 20, 2004, and handlers need to consider their 
allotment and how best to service their customers; (2) the industry has 
been discussing this issue for some time, and the Committee has kept 
the industry well informed; (3) this action has been widely discussed 
at various industry and association meetings, and interested persons 
have

[[Page 50275]]

had time to determine and express their positions; (4) this action is 
similar to those recommended in previous seasons; and (5) this rule 
provides a 30-day comment period and any comments received will be 
considered prior to finalization of this rule. A comment period of 30 
days is appropriate because it will allow for any needed intra-seasonal 
changes to be made in a timely manner.

List of Subjects in 7 CFR Part 905

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


0
For the reasons set forth in the preamble, 7 CFR part 905 is amended as 
follows:

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

0
1. The authority citation for 7 CFR part 905 continues to read as 
follows:

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


0
2. Section 905.350 is revised to read as follows:


Sec.  905.350  Red seedless grapefruit regulation.

    This section establishes the weekly percentages to be used to 
calculate each handler's weekly allotment of small sizes. Handlers can 
fill their allotment with size 56, size 48, or a combination of the two 
sizes such that the total of these shipments are within the established 
weekly limits. The weekly percentages for size 48 (3\9/16\ inches 
minimum diameter) and size 56 (3\5/16\ inches minimum diameter) red 
seedless grapefruit grown in Florida, which may be handled during the 
specified weeks, are as follows:

------------------------------------------------------------------------
                                                               Weekly
                           Week                             percentage
------------------------------------------------------------------------
(a) 9/20/04 through 9/26/04.............................              45
(b) 9/27/04 through 10/3/04.............................              45
(c) 10/4/04 through 10/10/04............................              45
(d) 10/11/04 through 10/17/04...........................              36
(e) 10/18/04 through 10/24/04...........................              36
(f) 10/25/04 through 10/31/04...........................              36
(g) 11/1/04 through 11/7/04.............................              36
(h) 11/8/04 through 11/14/04............................              36
(i) 11/15/04 through 11/21/04...........................              36
(j) 11/22/04 through 11/28/04...........................              36
(k) 11/29/04 through 12/5/04............................              36
(l) 12/6/04 through 12/12/04............................              36
(m) 12/13/04 through 12/19/04...........................              36
(n) 12/20/04 through 12/26/04...........................              36
(o) 12/27/04 through 1/2/05.............................              36
(p) 1/3/05 through 1/9/05...............................              36
(q) 1/10/05 through 1/16/05.............................              36
(r) 1/17/05 through 1/23/05.............................              36
(s) 1/24/05 through 1/30/05.............................              40
(t) 1/31/05 through 2/6/05..............................              40
(u) 2/7/05 through 2/13/05..............................              45
(v) 2/14/05 through 2/20/05.............................              45
------------------------------------------------------------------------


    Dated: August 10, 2004.
A. J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-18607 Filed 8-13-04; 8:45 am]
BILLING CODE 3410-02-P