[Federal Register Volume 69, Number 203 (Thursday, October 21, 2004)]
[Rules and Regulations]
[Pages 61755-61758]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-23628]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket No. FV04-985-2 IFR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Revision of the Salable Quantity and Allotment 
Percentage for Class 3 (Native) Spearmint Oil for the 2004-2005 
Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

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SUMMARY: This rule revises the quantity of Class 3 (Native) spearmint 
oil produced in the Far West that handlers may purchase from, or handle 
for, producers during the 2004-2005 marketing year by increasing the 
salable quantity from 773,474 pounds to 1,095,689 pounds, and the 
allotment percentage from 36 percent to 51 percent. The Spearmint Oil 
Administrative Committee (Committee), the agency responsible for local 
administration of the marketing order for spearmint oil produced in the 
Far West, unanimously recommended this rule to avoid extreme 
fluctuations in supplies and prices and to help maintain stability in 
the Far West spearmint oil market.

DATES: Effective June 1, 2004, through May 31, 2005; comments received 
by December 20, 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: Susan M. Hiller, Northwest Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA, 1220 SW. Third Avenue, suite 385, 
Portland, Oregon 97204; telephone: (503) 326-2724, Fax: (503) 326-7440; 
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 Order 
No. 985, as amended (7 CFR part 985), regulating the handling of 
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and 
designated parts of Nevada and Utah), hereinafter referred to as the 
``order.'' The order is effective under the Agricultural Marketing 
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter 
referred to as the ``Act.''
    The 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 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 revises the quantity of Native spearmint oil that 
handlers may purchase from, or handle for, producers during the 2004-
2005 marketing year, which ends on May 31, 2005. Specifically, this 
rule increases the salable quantity from 773,474 pounds to 1,095,689 
pounds, and the allotment percentage from 36 percent to 51 percent for 
Native spearmint oil for the 2004-2005 marketing year.
    The salable quantity is the total quantity of each class of oil 
that handlers may purchase from, or handle for, producers during a 
marketing year. The total salable quantity is divided by the total 
industry allotment base to determine an allotment percentage. Each 
producer is allotted a share of the salable quantity by applying the 
allotment percentage to the producer's individual allotment base for 
the applicable class of spearmint oil.
    The initial salable quantity and allotment percentages for Scotch 
and Native spearmint oils for the 2004-2005 marketing year were 
recommended by the Committee at its October 8, 2003, meeting. The 
Committee recommended salable quantities of 766,880 pounds and 773,474 
pounds, and allotment percentages of 40 percent and 36 percent, 
respectively, for Scotch and Native spearmint oils. A proposed rule was 
published in the Federal Register on January 23, 2004 (69 FR 3272). 
Comments on the proposed rule were solicited from interested persons 
until February 23, 2004. No comments were received. Subsequently, a 
final rule establishing the salable quantities and allotment 
percentages for Scotch and Native spearmint oils for the 2004-2005 
marketing year was published in the Federal Register on March 22, 2004 
(69 FR 13213).
    Pursuant to authority contained in Sec. Sec.  985.50, 985.51, and 
985.52 of the order, at its September 13, 2004, meeting, the Committee 
unanimously recommended that the allotment percentage for Native 
spearmint oil for the 2004-2005 marketing year be increased by 12 
percent from 36 percent to 48 percent. The Committee held another 
meeting on October 6, 2004, where, based on an unanticipated increase 
in demand, they unanimously recommended that the allotment percentage 
for Native spearmint oil for the 2004-2005 marketing year be increased 
by an additional 3 percent from 48 percent to 51 percent. Taking into 
consideration the following discussion on adjustments to the Native

[[Page 61756]]

spearmint oil salable quantity, the 2004-2005 marketing year salable 
quantity of 773,474 pounds will therefore be increased to 1,095,689 
pounds.
    The original total industry allotment base for Native spearmint oil 
for the 2004-2005 marketing year was established at 2,148,539 pounds 
and was revised at the beginning of the 2004-2005 marketing year to 
2,148,410 pounds to reflect a 2003-2004 marketing year loss of 129 
pounds of base due to non-production of some producers' total annual 
allotments. When the revised total allotment base of 2,148,410 pounds 
is applied to the originally established allotment percentage of 36 
percent, the 2004-2005 marketing year salable quantity of 773,474 
pounds is effectively modified to 773,428 pounds.
    By increasing the salable quantity and allotment percentage, this 
rule makes an additional amount of Native spearmint oil available by 
releasing oil from the reserve pool. When applied to each individual 
producer, the 15 percent allotment percentage increase allows each 
producer to take up to an amount equal to 15 percent of their allotment 
base from their Native spearmint oil reserve. Before November 1, 2004, 
a producer may also transfer excess oil to another producer to enable 
that producer to fill a deficiency in that producer's annual allotment. 
After November 1, 2004, if a producer does not have any reserve pool 
oil, or has less than 15 percent of their allotment base in the reserve 
pool, the increase in allotment percentage will actually make less than 
such amount available to the market.
    The following table summarizes the Committee recommendation:

Native Spearmint Oil Recommendation

    (A) Estimated 2004-2005 Allotment Base--2,148,539 pounds. This is 
the estimate that the original 2004-2005 Native spearmint oil salable 
quantity and allotment percentage was based on.
    (B) Revised 2004-2005 Allotment Base--2,148,410 pounds. This is 129 
pounds less than the estimated allotment base of 2,148,539 pounds. This 
is less because some producers failed to produce all of their previous 
year's allotment.
    (C) Initial 2004-2005 Allotment Percentage--36 percent.
    (D) Initial 2004-2005 Salable Quantity--773,474. This figure is 36 
percent of 2,148,539 pounds.
    (E) Initial Adjustment to the 2004-2005 Salable Quantity--773,428 
pounds. This figure reflects the salable quantity initially available 
after the beginning of the 2004-2005 marketing year due to the 129 
pound reduction in the industry allotment base to 2,148,410 pounds.
    (F) Increase in Allotment Percentage--15 percent. The Committee 
recommended a 12 percent increase at its September 13, 2004, meeting 
and an additional 3 percent increase at its October 6, 2004, meeting, 
for a total increase of 15 percent.
    (G) Revised 2004-2005 Allotment Percentage--51 percent. This figure 
is derived by adding the 15 percent increase to the initial 2004-2005 
allotment percentage of 36 percent.
    (H) Calculated Revised 2004-2005 Salable Quantity--1,095,689 
pounds. This figure is 51 percent of the revised 2004-2005 allotment 
base of 2,148,410 pounds.
    (I) Computed Increase in the 2004-2005 Salable Quantity--322,262 
pounds. This figure is 15 percent of the revised 2004-2005 allotment 
base of 2,148,410 pounds.
    In making this recommendation, the Committee considered all 
available information on price, supply, and demand. The Committee also 
considered reports and other information from handlers and producers in 
attendance at the meetings and reports given by the Committee manager 
from handlers who were not in attendance. The 2004-2005 marketing year 
began on June 1, 2004. Handlers have reported purchases of 602,895 
pounds of Native spearmint oil for the period of June 1, 2004, through 
September 30, 2004. This amount exceeds the five-year average of 
553,067 pounds for this period by 49,828 pounds. On average, handlers 
indicated that the estimated total demand for the 2004-2005 marketing 
year could be 1,105,000 pounds. This amount exceeds the five-year 
average for an entire marketing year of 973,456 pounds by 131,544 
pounds. Therefore, based on past history, the industry may not be able 
to meet market demand without this increase. When the Committee made 
its initial recommendation for the establishment of the Native 
spearmint oil salable quantity and allotment percentage for the 2004-
2005 marketing year, it had anticipated that the year would end with an 
ample available supply.
    Based on its analysis of available information, USDA has determined 
that the salable quantity and allotment percentage for Native spearmint 
oil for the 2004-2005 marketing year should be increased to 1,095,689 
pounds and 51 percent, respectively.
    This rule relaxes the regulation of Native spearmint oil and will 
allow for market needs and improve producer returns. In conjunction 
with the issuance of this rule, the Committee's revised marketing 
policy statement for the 2004-2005 marketing year has been reviewed by 
USDA. The Committee's marketing policy statement, a requirement 
whenever the Committee recommends implementing volume regulations or 
recommends revisions to existing volume regulations, meets the intent 
of Sec.  985.50 of the order. During its discussion of revising the 
2004-2005 salable quantities and allotment percentages, the Committee 
considered: (1) The estimated quantity of salable oil of each class 
held by producers and handlers; (2) the estimated demand for each class 
of oil; (3) prospective production of each class of oil; (4) total of 
allotment bases of each class of oil for the current marketing year and 
the estimated total of allotment bases of each class for the ensuing 
marketing year; (5) the quantity of reserve oil, by class, in storage; 
(6) producer prices of oil, including prices for each class of oil; and 
(7) general market conditions for each class of oil, including whether 
the estimated season average price to producers is likely to exceed 
parity. Conformity with USDA's ``Guidelines for Fruit, Vegetable, and 
Specialty Crop Marketing Orders'' has also been reviewed and confirmed.
    The increase in the Native spearmint oil salable quantity and 
allotment percentage allows for anticipated market needs for this class 
of oil. In determining anticipated market needs, consideration by the 
Committee was given to historical sales, and changes and trends in 
production and demand.

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 8 handlers of spearmint oil who are subject 
to regulation under the marketing order and approximately 98 producers 
of Class 3 (Native) spearmint oil in the

[[Page 61757]]

regulated area. Small agricultural service firms are defined by the 
Small Business Administration (SBA) (13 CFR 121.201) 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.
    Based on SBA's definition of small entities, the Committee 
estimates that 2 of the 8 handlers regulated by the order could be 
considered small entities. Most of the handlers are large corporations 
involved in the international trading of essential oils and the 
products of essential oils. In addition, the Committee estimates that 
15 of the 98 Native spearmint oil producers could be classified as 
small entities under the SBA definition. Thus, a majority of handlers 
and producers of Far West spearmint oil may not be classified as small 
entities.
    The Far West spearmint oil industry is characterized by producers 
whose farming operations generally involve more than one commodity, and 
whose income from farming operations is not exclusively dependent on 
the production of spearmint oil. A typical spearmint oil-producing 
operation has enough acreage for rotation such that the total acreage 
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil producer has 
to have considerably more acreage than is planted to spearmint during 
any given season. Crop rotation is an essential cultural practice in 
the production of spearmint oil for weed, insect, and disease control. 
To remain economically viable with the added costs associated with 
spearmint oil production, most spearmint oil-producing farms fall into 
the SBA category of large businesses.
    Small spearmint oil producers generally are not as extensively 
diversified as larger ones and as such are more at risk to market 
fluctuations. Such small producers generally need to market their 
entire annual crop and do not have the luxury of having other crops to 
cushion seasons with poor spearmint oil returns. Conversely, large 
diversified producers have the potential to endure one or more seasons 
of poor spearmint oil markets because income from alternate crops could 
support the operation for a period of time. Being reasonably assured of 
a stable price and market provides small producing entities with the 
ability to maintain proper cash flow and to meet annual expenses. Thus, 
the market and price stability provided by the order potentially 
benefit the small producer more than such provisions benefit large 
producers. Even though a majority of handlers and producers of 
spearmint oil may not be classified as small entities, the volume 
control feature of this order has small entity orientation.
    This rule increases the quantity of Native spearmint oil that 
handlers may purchase from, or handle for, producers during the 2004-
2005 marketing year, which ends on May 31, 2005. Pursuant to authority 
contained in Sec. Sec.  985.50, 985.51, and 985.52 of the order, at its 
September 13, 2004, meeting, the Committee unanimously recommended that 
the allotment percentage for Native spearmint oil for the 2004-2005 
marketing year be increased by 12 percent from 36 percent to 48 
percent. The Committee held another meeting on October 6, 2004, where, 
based on an unanticipated increase in demand, they unanimously 
recommended that the allotment percentage for Native spearmint oil for 
the 2004-2005 marketing year be increased by an additional 3 percent 
from 48 percent to 51 percent. Therefore, the salable quantity for 
Native spearmint oil increases from 773,474 pounds to 1,095,689 pounds 
for the 2004-2005 marketing year.
    An econometric model was used to assess the impact that volume 
control has on the prices producers receive for their commodity. 
Without volume control, spearmint oil markets would likely be over-
supplied, resulting in low producer prices and a large volume of oil 
stored and carried over to the next crop year. The model estimates how 
much lower producer prices would likely be in the absence of volume 
controls.
    The recommended salable percentages, upon which 2004-2005 producer 
allotments are based, are 40 percent for Scotch and 51 percent for 
Native (a 15 percentage point increase from the original salable 
percentage of 36 percent). Without volume controls, producers would not 
be limited to these allotment levels, and could produce and sell 
additional spearmint. The econometric model estimated a $1.45 decline 
in the season average producer price per pound (from both classes of 
spearmint oil) resulting from the higher quantities that would be 
produced and marketed if volume controls were not used (i.e., if the 
salable percentages were set at 100 percent).
    Loosening the volume control restriction (by increasing the Native 
salable percentage from 36 percent to 51 percent) resulted in this 
revised price decline estimate of $1.45 per pound if volume controls 
were not used. A previous price decline estimate of $1.71 per pound was 
based on the 2004-2005 salable percentages (40 percent for Scotch and 
36 percent for Native) published in the Federal Register on March 22, 
2004 (69 FR 13213).
    The 2003 Far West producer price for both classes of spearmint oil 
was $9.50 per pound, which is below the average of $11.33 for the 
period of 1980 through 2002, based on National Agricultural Statistics 
Service data. The surplus situation for the spearmint oil market that 
would exist without volume controls in 2004-2005 also would likely 
dampen prospects for improved producer prices in future years because 
of the buildup in stocks.
    The use of volume controls allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have 
little or no effect on consumer prices of products containing spearmint 
oil and will not result in fewer retail sales of such products.
    Based on projections available at the meetings, the Committee 
considered alternatives to the 15 percent increase. The Committee not 
only considered leaving the salable quantity and allotment percentage 
unchanged, but also looked at various increases ranging from 10 percent 
to 20 percent. The Committee reached its recommendation to increase the 
salable quantity and allotment percentage for Native spearmint oil 
after careful consideration of all available information, and believes 
that the level recommended will achieve the objectives sought. Without 
the increase, the Committee believes the industry would not be able to 
meet market needs.
    This rule will not impose any additional reporting or recordkeeping 
requirements on either small or large spearmint oil 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.
    In addition, USDA has not identified any relevant Federal rules 
that duplicate, overlap or conflict with this rule.
    Further, the Committee meetings were widely publicized throughout 
the spearmint oil industry and all interested persons were invited to 
attend the meetings and participate in Committee deliberations. Like 
all Committee meetings, the September 13, 2004, meeting and the October 
6, 2004, meeting were public meetings and all entities, both large and 
small, were able to express their views on this issue.
    Finally, interested persons are invited to submit information on 
the regulatory

[[Page 61758]]

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 a revision to the salable quantity 
and allotment percentage for Native spearmint oil for the 2004-2005 
marketing year. A 60-day comment period is provided. 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 increases the quantity of Native spearmint oil 
that may be marketed during the marketing year which ends on May 31, 
2005; (2) the current quantity of Native spearmint oil may be 
inadequate to meet demand for the remainder of the marketing year, thus 
making the additional oil available as soon as is practicable is 
beneficial to both handlers and producers; (3) the Committee 
unanimously recommended these changes at public meetings and interested 
parties had an opportunity to provide input; and (4) this rule provides 
a 60-day comment period and any comments received will be considered 
prior to finalization of this rule.

List of Subjects in 7 CFR Part 985

    Marketing agreements, Oils and fats, Reporting and recordkeeping 
requirements, Spearmint oil.


0
For the reasons set forth in the preamble, 7 CFR part 985 is amended as 
follows:

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL 
PRODUCED IN THE FAR WEST

0
1. The authority citation for 7 CFR part 985 continues to read as 
follows:

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

0
2. In Sec.  985.223, paragraph (b) is revised to read as follows:


    Note: This section will not appear in the annual Code of Federal 
Regulations.

Sec.  985.223  Salable quantities and allotment percentages--2004-2005 
marketing year.

* * * * *
    (b) Class 3 (Native) oil--a salable quantity of 1,095,689 pounds 
and an allotment percentage of 51 percent.

    Dated: October 15, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-23628 Filed 10-18-04; 4:40 pm]
BILLING CODE 3410-02-P