[Federal Register Volume 70, Number 177 (Wednesday, September 14, 2005)]
[Rules and Regulations]
[Pages 54235-54242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-18279]



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  Federal Register / Vol. 70, No. 177 / Wednesday, September 14, 2005 / 
Rules and Regulations  

[[Page 54235]]



DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 905

[Docket No. FV05-905-2 IFR]


Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida; 
Modifying Procedures and Establishing Regulations To Limit Shipments of 
Small Sizes of Red Seedless Grapefruit

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: This rule limits the volume of sizes 48 and 56 red seedless 
grapefruit entering the fresh market and changes procedures used for 
this purpose under the marketing order for oranges, grapefruit, 
tangerines, and tangelos grown in Florida (order). The order is 
administered locally by the Citrus Administrative Committee 
(Committee). The procedural changes modify the way a handler's average 
week is determined by providing that if crop conditions limit shipments 
from any of the three prior seasons, a prior season or seasons can be 
used for the three-season average. The average week is used by the 
Committee in determining the handler shipment allotments. This rule 
also limits the volume of small sizes entering the fresh market for the 
first 22 weeks of the 2005-2006 season beginning September 19, 2005. 
This action is intended to make the regulation more responsive to 
industry needs and provide adequate supplies of small red seedless 
grapefruit without saturating all markets. It is expected to stabilize 
supplies and improve grower returns.

DATES: Effective September 15, 2005; comments received by October 14, 
2005, 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: Doris Jamieson, Southeast Marketing 
Field Office, Marketing Order Administration Branch, Fruit and 
Vegetable Programs, AMS, USDA; 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 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 changes the procedures used to limit the volume of sizes 
48 and 56 red seedless grapefruit entering the fresh market by 
modifying the way a handler's average week is determined. The 
procedural changes provide that if crop conditions limit shipments from 
any of the three prior seasons, a prior season or seasons can be 
substituted in the three-season average. This rule also limits the 
volume of small sized red seedless grapefruit entering the fresh market 
for the first 22 weeks of the 2005-2006 season beginning September 19, 
2005. This action is intended to make the regulation more responsive to 
industry needs and provide adequate supplies of small red seedless 
grapefruit without saturating all markets. It is expected to stabilize 
supplies and improve grower returns. The Committee unanimously 
recommended this action at a meeting held on May 10, 2005.
    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

[[Page 54236]]

during a prior period, established by the Committee and approved by 
USDA.
    Section 905.153 of the regulations specifies procedures for 
limiting the volume of small red seedless grapefruit entering the fresh 
market. These procedures specify that the Committee may recommend that 
only a certain percentage of sizes 48 and 56 red seedless grapefruit 
can be made available for fresh shipment 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 
recommended percentage is applied to each handler's average week to 
determine the quantity of sizes 48 and 56 red seedless grapefruit the 
handler may ship. The average week constitutes the prior period 
specified in Sec.  905.52. Therefore, an average week is calculated for 
each handler.
    Currently, an average week is calculated using the immediately 
preceding three seasons. This rule amends Sec.  905.153 to modify the 
way a handler's average week is determined. Provisions are added 
providing that if crop conditions limit shipments from any of the three 
prior seasons, a prior season or seasons can be used for the three-
season average.
    An average week is calculated by adding the total red seedless 
grapefruit shipments by a handler during the 33-week period beginning 
the third Monday in September for the immediately preceding three 
seasons. This total is divided by three to establish an average season, 
and is then divided by the 33 weeks in a season to derive the average 
week. When the Committee utilizes the provisions of Sec.  905.153 and 
establishes percentages for the regulatory period, a handler's average 
week is multiplied by the applicable percentage to establish that 
handler's allotment for shipping small red seedless grapefruit during 
that particular week.
    In 2004, the major grapefruit growing regions in Florida suffered 
significant damage and fruit loss from multiple hurricanes. The 
official USDA crop estimate for the 2004-05 season reflected a 69 
percent decrease from the previous season's estimate. Fresh shipments 
of red grapefruit for the 2004-05 season were reduced by more than 63 
percent in comparison to the 2003-04 season. Consequently, the 
percentage of size regulation was not utilized for the 2004-05 season.
    The Committee met May 10, 2005, to consider implementing a 
percentage of size regulation for red seedless grapefruit for the 2005-
06 season. During its discussions, concerns were raised regarding the 
impact of the 2004-05 season when calculating a handler's average week. 
Most handlers' shipments reflect a significant decline in volume for 
the 2004-05 season, with some handlers shipping no volume at all due to 
the damage sustained by their packinghouses. The Committee believes 
using figures from a season in which adverse crop conditions cause a 
reduction in the amount of fruit produced would distort the accuracy of 
a handler's average shipments. Committee members agreed including the 
2004-05 season in the calculation of a handler's average week would 
result in averages that are not reflective of a handler's average 
shipments.
    When a handler is fairly consistent in the amount of fruit shipped 
each season, one season of decreased volume has the potential to 
drastically reduce their shipment average. With the handler's average 
week based on a three-season average, including a season such as last 
season could significantly lower the handler's average week on which 
the percentage of size regulation is based, decreasing a handler's 
allotment of small grapefruit sizes.
    Including the 2004-05 season in base calculations would reduce the 
total base available to the industry by more than 20 percent. However, 
the impact on individual handlers could be as great as reducing their 
base by a third. Therefore, the Committee voted unanimously to change 
Sec.  905.153 to exclude the 2004-05 season when calculating a 
handler's average week.
    To accommodate this recommendation and provide a method to handle 
similar situations should they occur during future seasons, this rule 
amends Sec.  905.153 to provide that should shipments from any or all 
of the immediately preceding three seasons be limited because of crop 
conditions, the Committee could use a prior season or seasons when 
determining the three-season average for the purpose of calculating a 
handler's average week. Under this change, the Committee would meet 
prior to the issuance of a percentage size regulation and determine 
which seasons are to be used to calculate a handler's average week. 
This change gives the Committee some additional flexibility to account 
for adverse crop conditions and assists in providing an average 
reflective of a handler's normal shipments. For the 2005-06 season, 
each handler's average week will be computed using the 2001-02, 2002-
03, and the 2003-04 seasons.
    This interim final rule also 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 2005-06 season. This rule 
establishes weekly percentages at 35 percent for the first six weeks 
(September 19, 2005 through October 30, 2005), and 25 percent for weeks 
seven through 22 (October 31, 2005 through February 19, 2005). The 
Committee also unanimously recommended this action at its May 10, 2005, 
meeting. This action is similar to those taken in previous seasons.
    A normal season for Florida grapefruit runs from September through 
June. During the first 22 weeks, there is usually an oversupply of 
small red seedless grapefruit and a reduced demand for such fruit until 
later in the season when there is a greater demand for smaller sizes 
from export markets. The Committee believes the over shipment of 
smaller-sized red seedless grapefruit in the first 22 weeks of the 
season 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. When there is too much volume of 
the smaller sizes available, the overabundance of small-sized fruit 
pulls the prices down for all sizes. 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 growers. In the 
absence of this action, grower prices may be lower than their cost of 
production.
    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.

[[Page 54237]]

    The Committee believes the over shipment of smaller-sized red 
seedless grapefruit contributed to these poor returns for growers and 
to lower prices. Based on available statistical information, Committee 
members concluded that once shipments of sizes 48 and 56 reached levels 
above 250,000 cartons per week, prices declined on those and most other 
sizes of red seedless grapefruit. The Committee believed if shipments 
of small sizes were maintained at around or below 250,000 cartons a 
week, prices would stabilize and demand for 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 for the 2001-02, 2002-03, and 2003-
04 seasons. Due to the extensive damage from three major hurricanes in 
2004, percentage of size regulation was not utilized for the 2004-05 
season. When percentage of size regulation has been utilized, prices 
have increased and movement stabilized when compared to seasons without 
regulation.
    Because of the damage from the 2004 hurricanes, production of red 
seedless grapefruit for the 2005-06 season is not anticipated to be as 
large as in seasons past. The crop is expected to rebound from last 
season's weather reduced volume. However, an accurate estimate of the 
crop will not be available until the official USDA crop estimate is 
released in October. In addition, for four of the last five seasons 
prior to the hurricanes, the crops have displayed a tendency toward a 
greater volume of small sizes than in previous seasons. It is possible 
that trees stressed by last season's storms may produce an even greater 
volume of small-sized fruit.
    Based on the available information, the Committee believes that for 
the 2005-06 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 per week level. To address the 
volume of small-sized red seedless grapefruit available and to prevent 
the over shipment of small sizes, the Committee voted unanimously 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 
2005-06 season.
    In making its recommendation, the Committee considered the success 
of previous percentage of size regulations and their experience from 
past seasons. One such indicator is a study commissioned by the 
Committee 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, 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 seasons compared to 
$5.83 for the three seasons 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 $5.28 for the seasons 1998-99 through 2003-
04 with percentage of size regulation compared to $3.08 for the three 
seasons prior to regulation.
    In September 2004, the University of Florida, Citrus Research and 
Education Center published an estimated cost of production for 
grapefruit for the 2003-04 season. The cost to produce grapefruit for 
the fresh market was estimated at $1,089.13 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 445 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 $2.45 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 2003-04, the on-tree value has averaged 
$2.88 per box for red grapefruit.
    Small growers have struggled the last ten seasons to receive 
returns above 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 for percentage of size regulation 
was maintaining the price differential between larger and 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 seasons 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 seasons 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 
seasons

[[Page 54238]]

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, they further indicated 
that if the domestic market becomes glutted with too many small-sized 
grapefruit (48 and 56), the 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 sizes 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.
    There are also other conditions warranting the consideration of 
establishing percentage of size regulation for the 2005-06 season. For 
the five seasons, 1999-2000 through 2003-04, the percentage of the 
remaining crop represented by small sizes in February averaged around 
45 percent. This compares to an average of 31 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 eight of the nine seasons prior to the 2004-05 season, 
there has been a movement toward an increased volume of small sizes as 
a percentage of the overall crop. Currently, it is unclear how the 
2005-06 crop will size. Due to hurricane damage in 2004, it is 
anticipated that the 2005-06 crop will be smaller than in past seasons, 
but production will be significantly greater than last season. However, 
it is possible that because of the weather damage sustained during the 
2004-05 seasons, a larger quantity of the fruit produced may be small 
sizes, 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 48 percent of red seedless grapefruit was used for 
processing in 2003-04, with the majority being squeezed for juice. 
However, this outlet offers limited returns. Of the last eight seasons, 
only 1999-2000 produced on-tree returns for processed red seedless 
grapefruit exceeding $1 per box. Returns for 2003-04 processed red 
seedless grapefruit averaged a negative $0.13 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 
1999-2000 through 2003-04, the differential between fresh prices and 
processed prices has averaged $5.06 per box. Consequently, growers 
prefer to ship grapefruit to the fresh market.
    By the start of the season, the Florida Department of Citrus 
projects that around 26 weeks worth of juice will remain in inventory. 
Due to current inventories, on-tree prices for processed red seedless 
grapefruit for the 2005-06 season are expected to 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, as was the case last season, further aggravating 
problems with excessive volumes of small sizes.
    The percentage of size regulation has a positive impact on grower 
returns 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 
seven seasons prior to the hurricanes have been effective and that 
problems successfully addressed by percentage of size regulation will 
return without regulation. In its discussion of this issue, the 
Committee recognized that the crop size would reflect the damage 
sustained from last season's hurricanes. However, they still support 
the use of percentage size regulation for the 2005-06 season.
    Even though the overall crop may be reduced, a substantial increase 
in volume is expected in comparison to the 2004-05 season. In addition, 
as was the case last season, a greater percentage of the overall volume 
may be shifted to the

[[Page 54239]]

fresh market, further increasing fresh shipments. In the seasons prior 
to last season, approximately 50 percent of the crop went for 
processing. However, with last season's weather reduced crop, 
approximately 65 percent of the crop was shipped to the fresh market. 
Further, it is anticipated that a greater percentage of the crop will 
be small sizes. Consequently, the Committee believes weekly percentage 
of size regulation should be established for each of the 22 weeks of 
the regulatory period for the 2005-06 season. The Committee recommended 
establishing weekly percentages at 35 percent for the first six weeks 
and 25 percent for weeks seven through 22.
    The Committee considered the percentages set in previous seasons as 
a basis for the 2005-06 season. They also took into consideration the 
damage to the citrus industry as a result of the 2004 hurricanes and 
how more information regarding the crop would be available following 
the start of the season. Members of the Committee agreed that there 
will be a smaller than usual crop of red seedless grapefruit for the 
2005-06 season, but believe that percentages need to be established to 
prevent a glut on the market to provide 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, and set the first six weeks at 35 percent. Setting the 
percentages at 35 percent provides a total industry base of 242,739 
cartons (35 percent of the total industry base of 693,540 cartons). 
This allows total industry shipments to approach the 250,000 carton 
level without exceeding it.
    For the remaining 16 weeks, the Committee recommended setting 
weekly percentages at 25 percent, the tightest restriction allowed 
under the order's rules and regulations. At the time of the May 
meeting, grapefruit had not yet begun to size, giving little indication 
as to the distribution of sizes, the size of the overall crop, or the 
impact of the lingering effects of last season's storms. The Committee 
recognized the first reports on how the crop is sizing will not be 
available until after September, and that more information regarding 
the current season will be available following the official USDA crop 
estimate in October.
    Setting the weekly percentages at 25 percent for each of the 
remaining weeks provides the Committee with the greatest flexibility in 
responding to the information regarding this season as it comes 
available. As was their practice during the first seasons of percentage 
of size regulation, the Committee believes it is best to set regulation 
for these weeks at the most restrictive level, and then relax the 
percentage as conditions warrant.
    Because of the likelihood that this season will differ considerably 
from previous seasons where percentage of size regulation was 
implemented, the Committee wants to ensure it has the best information 
available when considering the established percentages. Consequently, 
the Committee intends to meet as needed during the season to consider 
adjustments in the weekly percentage rates, as was done in previous 
seasons. Further, at the May 10, 2005, meeting, it was stated that the 
48 and Smaller Red Grapefruit Subcommittee (subcommittee) will meet 
shortly after the 2005-06 crop estimate is released on October 11, 
2005. At that time, the subcommittee will review the information 
available and develop recommendations for consideration by the full 
Committee, including increasing the set percentages to release greater 
quantities of sizes 48 and 56, or even withdrawing regulation should 
conditions warrant.
    Therefore, the Committee believes it is best to set regulation at 
these levels, and then relax the percentages later in the season based 
on the additional information as it comes available. Any changes to the 
weekly percentages set by this rule will require additional rulemaking 
and the approval of USDA.
    This rule establishes weekly percentages at 35 percent for the 
first six weeks and 25 percent for weeks seven through 22. This rule is 
intended to fully supply all markets for small sizes with fresh red 
seedless grapefruit sizes 48 and 56, while avoiding oversupplying these 
markets to the detriment of grower revenues. The Committee plans to 
meet as needed during the 22-week period to ensure weekly percentages 
are at the appropriate levels.
    Under Sec.  905.153, the quantity of sizes 48 and 56 red seedless 
grapefruit a handler may ship during a regulated week is calculated 
using the set weekly percentage. The set percentage is applied to a 
handler's average week to determine that handler's allotments of small 
sizes. Utilizing the provisions discussed in the first part of this 
rule and the Committee's recommendation at its May 10, 2005, meeting, a 
handler's average week for the 2005-06 season will be calculated using 
the 2001-02, 2002-03, and 2003-04 seasons.
    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 19, 
2005. Each regulation week begins Monday at 12 a.m. and ends at 11:59 
p.m. the following Sunday.
    Section 905.153(d) provides 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 handlers of Florida grapefruit who are 
subject to regulation under the marketing order

[[Page 54240]]

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 $6,000,000, 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 the SBA 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.
    This rule changes the procedures used to limit the volume of sizes 
48 and 56 red seedless grapefruit entering the fresh market by 
modifying the way a handler's average week is determined. The changes 
provide that if crop conditions limit shipments from any of the 
immediately preceding three seasons, a prior season or seasons can be 
used for the three-season average. This rule also limits the volume of 
small sizes entering the fresh market for the first 22 weeks of the 
2005-2006 season beginning September 19, 2005. This action makes the 
regulation more responsive to industry needs and provides adequate 
supplies of small red seedless grapefruit without saturating all 
markets. This is intended to help stabilize supplies and improve grower 
returns. This rule revises the provisions of Sec.  905.153 and utilizes 
these provisions to establish the percentage size regulation. Authority 
for this action is provided in Sec.  905.52 of the order. The Committee 
unanimously recommended these changes at a meeting held on May 10, 
2005.
    The first action in this rule revises the procedures in Sec.  
905.153 used in implementing percentage size regulations for small red 
seedless grapefruit under the order. These procedures will be applied 
uniformly for all handlers regardless of size. This action is not 
expected to decrease the overall consumption of red seedless grapefruit 
or result in any additional costs for the industry.
    Prior to this change, a handler's average week, which is used as a 
base during percentage of size regulation, was calculated using the 
immediately preceding three seasons. This change provides that should 
shipments from any or all of the three prior seasons be limited because 
of crop conditions, the Committee could use a prior season or seasons 
when determining the three-season average for the purpose of 
calculating a handler's average week. This change provides the 
Committee with some additional flexibility to account for adverse crop 
conditions and assists in providing an average reflective of a 
handler's normal shipments.
    Using shipment figures from a season where adverse crop conditions 
reduced the amount of fruit shipped would distort the accuracy of a 
handler's average shipments. In 2004, the major grapefruit growing 
regions in Florida suffered significant damage and fruit loss from 
multiple hurricanes, reducing the official USDA crop estimate by 69 
percent from the previous season. Most handlers' shipments reflected a 
significant decline in volume, with some handlers shipping no volume at 
all due to the damage sustained by their packinghouses.
    With the handler's average week based on a three-season average, 
including a season such as last season could significantly lower the 
handler's average week, decreasing a handler's allotment of small size. 
Including the 2004-05 season in base calculations for the 2005-06 
season would reduce the total industry base available by more than 20 
percent, with the possible reduction for individual handlers being as 
much as a third.
    Consequently, this change provides additional allotment in seasons 
following years where the crop was reduced by adverse weather 
conditions. It allows the Committee to exclude those seasons, thus, 
providing an average week that more closely reflects a handler's 
shipments and makes additional allotment available.
    In terms of the second action implemented by this rule, 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 that spot picking only fractionally increases 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 action 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.
    Handlers can also 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 (over shipments are not 
allowed during the last regulated week). Approximately 315 loans and 
transfers were used during the 2003-04 season. Statistics for 2003-04 
show the total available allotment was used in only 3 weeks of the 
regulated period. Therefore, the overall impact of this regulation on 
total shipments should be minimal.
    The Committee believes establishing percentage of size regulation 
during the 2005-06 season will have benefits 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 seven seasons utilizing 
percentage of size regulation compared to $5.83 for the three seasons 
prior to using

[[Page 54241]]

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 $5.28 
for the seasons 1998-99 through 2003-04 with percentage of size 
regulation, compared to $3.08 for the three seasons 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.
    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 
consumption of red seedless grapefruit. The benefits of this action are 
expected to be available to all red seedless grapefruit growers and 
handlers regardless of their size of operation. This action will likely 
help small, under-capitalized growers who need additional weekly 
revenues to meet operating costs.
    The Committee considered several alternatives when discussing these 
actions. One alternative was maintaining the way a handler's average 
week is calculated using the immediately preceding three seasons. The 
Committee believes that including numbers from the 2004-05 season would 
result in averages unreflective of a handler's shipments. Therefore, 
this alternative was rejected. The Committee also considered not 
recommending percentage of size regulation for the 2005-06 season. 
However, because more information regarding the season would be 
available in October, the Committee agreed percentage of size 
regulation should be established at the levels recommended. Following 
the announcement of the official crop estimate on October 11, 2005, the 
question of whether to adjust the levels recommended or to remove 
regulation entirely will be revisited. 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.
    AMS is committed to compliance with the Government Paperwork 
Elimination Act (GPEA), which requires Government agencies in general 
to provide the public the option of submitting information or 
transacting business electronically to the maximum extent possible.
    In addition, 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).
    Further, 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. Like all 
Committee meetings, the May 10, 2005, meeting was a public meeting 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 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 revising the procedures used to limit 
the volume of sizes 48 and 56 red seedless grapefruit entering the 
fresh market under the order and on limiting the volume of small red 
seedless grapefruit entering the fresh market during the first 22 weeks 
of the 2005-06 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 19, 2005, 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 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:

[[Page 54242]]

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.


Sec.  905.153  [Amended]

0
2. In Sec.  905.153, paragraph (a), a new sentence is added following 
the third sentence to read as follows: ``If crop conditions limit 
shipments from any or all of the immediately preceding three season(s), 
the committee may use a prior season or seasons for the purposes of 
calculating an average week.''

0
3. Section 905.350 is added 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) 9/19/05 through 9/25/05................................           35
(b) 9/26/05 through 10/2/05................................           35
(c) 10/3/05 through 10/9/05................................           35
(d) 10/10/05 through 10/16/05..............................           35
(e) 10/17/05 through 10/23/05..............................           35
(f) 10/24/05 through 10/30/05..............................           35
(g) 10/31/05 through 11/6/05...............................           25
(h) 11/7/05 through 11/13/05...............................           25
(i) 11/14/05 through 11/20/05..............................           25
(j) 11/21/05 through 11/27/05..............................           25
(k) 11/28/05 through 12/4/05...............................           25
(l) 12/5/05 through 12/11/05...............................           25
(m) 12/12/05 through 12/18/05..............................           25
(n) 12/19/05 through 12/25/05..............................           25
(o) 12/26/05 through 1/1/06................................           25
(p) 1/2/06 through 1/8/06..................................           25
(q) 1/9/06 through 1/15/06.................................           25
(r) 1/16/06 through 1/22/06................................           25
(s) 1/23/06 through 1/29/06................................           25
(t) 1/30/06 through 2/5/06.................................           25
(u) 2/6/06 through 2/12/06.................................           25
(v) 2/13/06 through 2/19/06................................           25
------------------------------------------------------------------------


    Dated: September 9, 2005.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 05-18279 Filed 9-13-05; 8:45 am]
BILLING CODE 3410-02-P