[Federal Register Volume 71, Number 69 (Tuesday, April 11, 2006)]
[Rules and Regulations]
[Pages 18164-18168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-3417]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 982
[Docket No. FV06-982-1 FIR]
Hazelnuts Grown in Oregon and Washington; Establishment of Final
Free and Restricted Percentages for the 2005-2006 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final
rule, without change, an interim final rule establishing final free and
restricted percentages for domestic inshell hazelnuts for the 2005-2006
marketing year under the Federal marketing order for hazelnuts grown in
Oregon and Washington. This rule continues in effect the final free and
restricted percentages of 11.4388 and 88.5612 percent, respectively.
The percentages allocate the quantity of domestically produced
hazelnuts which may be marketed in the domestic inshell market (free)
and the quantity of domestically produced hazelnuts that must be
disposed of in other approved outlets (restricted). Volume regulation
is intended to stabilize the supply of domestic inshell hazelnuts to
meet the limited domestic demand for such hazelnuts with the goal of
providing producers with reasonable returns. This rule was recommended
unanimously by the Hazelnut Marketing Board (Board), which is the
agency responsible for local administration of the marketing order.
DATES: Effective Date: May 11, 2006. This rule applies to all 2005-2006
marketing year restricted hazelnuts until they are properly disposed of
in accordance with applicable marketing order requirements.
FOR FURTHER INFORMATION CONTACT: Barry Broadbent, Northwest Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Programs, AMS, USDA, 1220 SW., Third Avenue, Suite 385,
Portland, OR 97204; Telephone: (503) 326-2724, Fax: (503) 326-7440; or
George J. 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. 115 and Marketing Order No. 982, both as amended (7 CFR
part 982), regulating the handling of hazelnuts grown in Oregon and
Washington, 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.''
[[Page 18165]]
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. It is intended that this action apply to all
merchantable hazelnuts handled during the 2005-2006 marketing year
(July 1, 2005, through June 30, 2006). 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 continues in effect free and restricted percentages which
allocate the quantity of domestically produced hazelnuts which may be
marketed in domestic inshell markets (free) and hazelnuts which must be
exported, shelled, or otherwise disposed of by handlers (restricted).
The Board met and, after determining that volume regulation would tend
to effectuate the declared policy of the Act, developed a marketing
policy to be employed for the duration of the 2005-2006 marketing year.
Using statistical compilations and a well defined procedure, the Board
estimated inshell trade demand and total available supply for the
coming marketing year and subsequently used those estimates as the
basis for computing and announcing the free and restricted marketing
percentages for the year.
The Board determined that, for the 2005-2006 marketing year,
projected inshell trade demand is 3,095 tons and projected total
available new supply is 27,057 tons. Using those estimates, the Board
voted unanimously at their November 15, 2005, meeting to recommend to
USDA that the final free and restricted percentages for the 2005-2006
marketing year be established at 11.4388 and 88.5612 percent,
respectively.
The Board's authority to recommend volume regulation and use
computations to determine the allocation of hazelnuts to individual
markets is specified in Sec. 982.40 of the order. Under the order's
provisions, free and restricted market allocations of hazelnuts are
expressed as percentages of the total supply subject to regulation and
are derived by dividing the computed inshell trade demand by the
Board's estimate of the total domestically produced supply of hazelnuts
that will be available over the course of the marketing year.
Inshell trade demand, the key component of the marketing policy, is
the quantity of inshell hazelnuts necessary to adequately supply the
needs of the domestic market for the duration of the marketing year.
The Board determines the inshell trade demand for each year and uses
that estimate as the basis for setting the percentage of the available
hazelnuts that handlers may ship to the domestic inshell market
throughout the marketing season. The order specifies that the inshell
trade demand be computed by averaging the preceding three years' trade
acquisitions of inshell hazelnuts, allowing adjustments for abnormal
crop or marketing conditions. The Board may increase the computed
inshell trade demand by up to 25 percent, if market conditions warrant
an increase.
Prior to September 20 of each marketing year, the Board follows a
procedure, specified by the order, to compute and announce preliminary
free and restricted percentages. The preliminary free percentage
releases 80 percent of the adjusted inshell trade demand to the
domestic market. The purpose of releasing only 80 percent of the
inshell trade demand under the preliminary percentage is to guard
against any potential underestimate of crop size. The preliminary free
percentage is expressed as a percentage of the total supply subject to
regulation where total supply is the sum of the estimated crop
production less the three-year average disappearance plus the
undeclared carry-in from the previous marketing year.
On or before November 15 of each marketing year, the Board must
meet again to recommend interim final and final free and restricted
percentages and to authorize permitted outlets for restricted
percentages. Interim final percentages release 100 percent of the
inshell trade demand (effectively releasing the 20 percent held back
during the preliminary stage). Final percentages may release an
additional 15 percent for desirable carryout and are effective 30 days
prior to the end of the marketing year, or earlier as recommended by
the Board.
On August 23, 2005, the National Agricultural Statistics Service
(NASS) released an estimate of 2005 hazelnut production for the Oregon
and Washington area at 28,000 dry orchard-run tons. NASS uses an
objective yield survey method to estimate hazelnut production which has
historically been very accurate.
On August 25, 2005, the Board met and estimated total available
supply for the 2005 crop year at 27,057 tons. The Board arrived at this
estimate by using the crop estimate compiled by NASS (28,000 tons) and
then adjusting that estimate to account for disappearance and carry-in.
The order requires the Board to reduce the estimate by the average
disappearance over the preceding three years (1,075 tons) and to
increase it by the amount of undeclared carry-in from previous years'
production (132 tons).
Disappearance is the difference between the estimated orchard-run
production and the actual supply of merchantable product available for
sale by handlers. Disappearance can consist of (1) unharvested
hazelnuts; (2) culled product (nuts that are delivered to handlers but
later discarded); (3) product used on the farm, sold locally, or
otherwise disposed of by producers; and (4) statistical error in the
orchard-run production estimate.
Undeclared carry-in consists of hazelnuts that were produced in a
previous marketing year but were not subject to regulation because they
were not shipped during that marketing year. Undeclared carry-in is
subject to regulation during the current marketing year and is
accounted for as such by the Board.
As provided by the order, the Board computed inshell trade demand
to be 3,095 tons by taking the average of the past three years' sales
(2,775 tons), increasing the three year average by 15 percent to
encourage increased sales (416 tons), and then reducing that quantity
by the declared carry-in from last year's crop (96 tons). Declared
carry-in is product regulated under the order during a preceding
marketing year but not shipped during that year. This inventory must be
accounted for when estimating the quantity of product to make available
to adequately supply the market.
The Board computed and announced preliminary free and restricted
percentages of 9.1511 percent and 90.8489 percent, respectively, at its
August 25, 2005, meeting. The Board
[[Page 18166]]
computed the preliminary free percentage by multiplying the adjusted
trade demand by 80 percent and dividing the result by the total
available supply subject to regulation (3,095 tons x 80 percent/27,057
tons = 9.1511 percent). The preliminary free percentage initially
released 2,476 tons of hazelnuts from the 2005-2006 supply for domestic
inshell use, and the preliminary restricted percentage withheld 24,581
tons for the export and kernel markets.
Under the order, the Board must meet again on or before November 15
to recommend interim final and final percentages. The Board uses
current crop estimates to calculate interim final and final
percentages. The interim final percentages are calculated in the same
way as the preliminary percentages and release the remaining 20 percent
(to qtotal 100 percent of the inshell trade demand) previously computed
by the Board. Final free and restricted percentages may release up to
an additional 15 percent of the average of the preceding three years'
trade acquisitions to provide an adequate carryover into the following
season (i.e., desirable carryout). The order requires that the final
free and restricted percentages shall be effective 30 days prior to the
end of the marketing year, or earlier, if recommended by the Board and
approved by USDA. Revisions in the marketing policy can be made until
February 15 of each marketing year, but the inshell trade demand can
only be revised upward, consistent with Sec. 982.40(e).
The Board met on November 15, 2005, and reviewed and approved an
amended marketing policy and recommended the establishment of final
free and restricted percentages. The Board decided that market
conditions were such that it would not be necessary to release
additional domestic inshell hazelnuts to ensure adequate carryout.
Accordingly, no interim final free and restricted percentages were
recommended. The Board recommended final free and restricted
percentages of 11.4388 and 88.5612 percent, respectively, and that
those percentages be effective immediately. The final free percentage
releases approximately 3,095 tons of inshell hazelnuts from the 2005-
2006 supply for domestic use.
The final marketing percentages are based on the Board's final
production estimate and the following supply and demand information for
the 2005-2006 marketing year:
------------------------------------------------------------------------
Tons
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Total Available Supply:
(1) Production forecast (crop estimate)............. 28,000
(2) Less disappearance (three year average; 3.84 1,075
percent of Item 1).................................
(3) Merchantable production (Item 1 minus Item 2)... 26,925
(4) Plus undeclared carry-in as of July 1, 2005 132
(subject to regulation)............................
(5) Available supply subject to regulation (Item 3 27,057
plus Item 4).......................................
Inshell Trade Demand:
(6) Average trade acquisitions of inshell hazelnuts 2,775
(three prior years domestic sales).................
(7) Add: Increase to encourage increased sales (15% 416
of average trade acquisitions).....................
(8) Less: Declared carry-in as of July 1, 2005 (not 96
subject to 2005-2006 regulation)...................
(9) Adjusted inshell trade demand (Item 6 plus Item 3,095
7 minus Item 8)....................................
------------------------------------------------------------------------
Free Restricted
------------------------------------------------------------------------
Percentages:
(10) Final percentages (Item 9 11.4388 88.5612
divided by Item 5) x 100...........
(11) Final free tonnage (Item 9).... 3,095 ..............
(12) Final restricted tonnage (Item .............. 23,962
5 minus Item 11)...................
------------------------------------------------------------------------
In addition to complying with the provisions of the order, the
Board also considered USDA's 1982 ``Guidelines for Fruit, Vegetable,
and Specialty Crop Marketing Orders'' (Guidelines) when making its
computations in the marketing policy. This volume control regulation
provides a method to collectively limit the supply of inshell hazelnuts
available for sale in domestic markets. The Guidelines provide that the
domestic inshell market has available a quantity equal to 110 percent
of prior years' shipments before allocating supplies for the export
inshell, export kernel, and domestic kernel markets. This provides for
plentiful supplies for consumers and for market expansion, while
retaining the mechanism for dealing with oversupply situations. The
established final percentages make available approximately 416
additional tons to encourage increased sales. The total free supply for
the 2005-2006 marketing year is estimated to be 3,095 tons of
hazelnuts. That amount is 112 percent of prior years' sales and exceeds
the goal of the Guidelines.
Final Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this final regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
Small agricultural producers are defined by the Small Business
Administration (13 CFR 121.201) as those having annual receipts of less
than $750,000, and small agricultural service firms are defined as
those having annual receipts of less than $6,500,000. There are
approximately 700 producers of hazelnuts in the production area and
approximately 18 handlers subject to regulation under the order.
Average annual hazelnut revenue per producer is approximately $64,000.
This is computed by dividing NASS figures for the average value of
production for 2003 and 2004 ($44,863,000) by the number of producers.
The level of sales of other crops by hazelnut producers is not known.
In addition, based on Board records, about 83 percent of the handlers
ship under $6,500,000 worth of hazelnuts on an annual basis. In view of
the foregoing, it can be concluded that the majority of hazelnut
producers
[[Page 18167]]
and handlers may be classified as small entities.
Board meetings are widely publicized in advance of the meetings and
are held in a location central to the production area. The meetings are
open to all industry members and other interested persons who are
encouraged to participate in the deliberations and voice their opinions
on topics under discussion. Thus, Board recommendations can be
considered to represent the interests of small business entities in the
industry.
Currently, U.S. hazelnut production is allocated among three main
market outlets: Domestic inshell, export inshell, and kernel markets.
Handlers and producers receive the highest return for sales in the
domestic inshell market. They receive less for product going to export
inshell, and the least for kernels. Based on Board records of average
shipments for 1995-2004, the percentage going to each of these markets
was 11 percent (domestic inshell), 49 percent (export inshell), and 38
percent (kernels). Other minor market outlets make up the remaining 2
percent.
The inshell hazelnut market can be characterized as having limited
and inelastic demand with a very short primary marketing period. On
average, 76 percent of domestic inshell hazelnut shipments occur
between October 1 and November 30, primarily to supply holiday nut
demand. The inshell market is, therefore, prone to oversupply and
correspondingly low producer prices in the absence of supply
restrictions. This volume control regulation provides a method for the
U.S. hazelnut industry to limit the supply of domestic inshell
hazelnuts available for sale in the continental U.S. and thereby
mitigate market oversupply conditions.
Many years of marketing experience led to the development of the
current volume control procedures. These procedures have helped the
industry solve its marketing problems by keeping inshell supplies in
balance with domestic needs. Volume controls ensure that the domestic
inshell market is fully supplied while protecting the market from the
negative effects of oversupply.
Although the domestic inshell market is a relatively small portion
of total hazelnut sales (11 percent of total shipments), it remains a
profitable market segment. The volume control provisions of the
marketing order are designed to avoid oversupplying this particular
market segment, because that would likely lead to substantially lower
producer prices. The other market segments, export inshell and kernels,
are expected to continue to provide good outlets for U.S. hazelnut
production. Adverse weather conditions have negatively impacted
production in the other hazelnut producing regions of the world,
creating lower than normal world supplies. As a result, it is expected
that the demand and producer price for U.S. hazelnuts will remain above
average for some time.
In Oregon and Washington, low hazelnut production years typically
follow high production years (a historically consistent pattern), and
such was the case in 2005. The 2004 crop of 37,500 tons was 15 percent
above the 10-year average (1995-2004) for hazelnut production. The 2005
crop is estimated to be 14 percent below the average. It is predicted
that the 2006 crop will follow this pattern and will be larger than the
current crop year. This cyclical trait also leads to inversely
corresponding cyclical price patterns for hazelnuts. The intrinsic
cyclical nature of the hazelnut industry lends credibility to the
volume control measures enacted by the Board under the order.
Recent production and price data reflect the stabilizing effect of
volume control regulations. Industry statistics show that total
hazelnut production has varied widely over the 10-year period between
1995 and 2004, from a low of 16,500 tons in 1998 to a high of 49,500
tons in 2001. Production in the smallest crop year and the largest crop
year were 47 percent and 151 percent, respectively, of the 10-year
average of 32,685 tons. Producer price, however, has not fluctuated to
the extent of production. Prices in the lowest price year and the
highest price year were 90 percent and 150 percent, respectively, of
the 10-year average price of $959 per ton. The coefficient of variation
(a standard statistical measure of variability; ``CV'') for hazelnut
production over the 10-year period is 0.36. In contrast, the
coefficient of variation for hazelnut producer prices is 0.19, about
half of the CV for production. The lower level of variability of price
versus the variability of production provides an illustration of the
order's price-stabilizing impact.
Comparing revenue to cost at the producer level is useful in
highlighting the impact on producers of recent product and price
levels. A recent hazelnut production cost study from Oregon State
University estimated cost-of-production per acre to be approximately
$1,340 for a typical 100-acre hazelnut enterprise. Average producer
revenue per bearing acre (based on NASS acreage and value of production
data) equaled or exceeded that typical cost level only three times from
1995 to 2004. Average producer revenue was below typical costs in the
other years. Without the stabilizing influence of the order, producers
may have lost more money. While crop size has fluctuated, volume
regulations contribute to orderly marketing and market stability by
moderating the variation in returns for all producers and handlers,
both large and small.
While the level of benefits of this rulemaking is difficult to
quantify, the stabilizing effects of the volume regulations impact both
small and large handlers positively by helping them maintain and expand
markets even though hazelnut supplies fluctuate widely from season to
season. This regulation provides equitable allotment of the most
profitable market, the domestic inshell market. That market is
available to all handlers, regardless of size.
As an alternative to this regulation, the Board discussed not
regulating the 2005-2006 hazelnut crop. However, without any
regulations in effect, the Board believes that the industry would tend
to oversupply the inshell domestic market. Even though the 2005-2006
hazelnut crop is much smaller than last year's crop and 16 percent
below the ten-year average, the unregulated release of 27,057 tons on
the domestic inshell market would oversupply that small, but lucrative
market. The Board believes that any oversupply would completely disrupt
the market, causing producer returns to decrease dramatically.
Section 982.40 of the order establishes a procedure and
computations for the Board to follow in recommending to USDA
establishment of preliminary, interim final, and final percentages of
hazelnuts to be released to the free and restricted markets each
marketing year. The program results in plentiful supplies for consumers
and for market expansion while retaining the mechanism for dealing with
oversupply situations.
Hazelnuts produced under the order comprise virtually all of the
hazelnuts produced in the U.S. This production represents, on average,
less than 3 percent of total U.S. production of all tree nuts, and less
than 6 percent of the world's hazelnut production.
Last season, 68 percent of the domestically produced hazelnut
kernels were marketed in the domestic market and 32 percent were
exported. Domestically produced kernels generally command a higher
price in the domestic market than imported kernels. The industry is
continuing its efforts to develop and expand other markets with
emphasis on the domestic kernel market. Small business entities, both
[[Page 18168]]
producers and handlers, benefit from the expansion efforts resulting
from this program.
Inshell hazelnuts produced under the order compete well in export
markets because of quality. Based on Board statistics, Europe has
historically been the primary export market for U.S. produced inshell
hazelnuts. Recent years, though, have seen a significant shift in
export destinations. Last season, inshell shipments to Europe totaled
4,304 tons, representing just 22 percent of exports, with the largest
share going to Germany. Inshell shipments to Southwest Pacific
countries, and Hong Kong in particular, have increased dramatically in
the past few years, rising to 68 percent of total exports of 19,881
tons in 2004. The industry continues to pursue export opportunities.
There are some reporting, recordkeeping, and other compliance
requirements under the order. The reporting and recordkeeping burdens
are necessary for compliance purposes and for developing statistical
data for maintenance of the program. The information collection
requirements have been previously approved by the Office of Management
and Budget under OMB No. 0581-0178. The forms require information which
is readily available from handler records and which can be provided
without data processing equipment or trained statistical staff. 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. This rule does not
change those requirements. In addition, USDA has not identified any
relevant Federal rules that duplicate, overlap, or conflict with this
rule.
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.
Further, the Board's meetings were widely publicized throughout the
hazelnut industry and all interested persons were invited to attend the
meetings and participate in Board deliberations. Like all Board
meetings, those held on August 25, and November 15, 2005, were public
meetings and all entities, both large and small, were able to express
their views on this issue.
An interim final rule concerning this action was published in the
Federal Register on January 12, 2006. Copies of this rule were mailed
by the Board's staff to all Board members. In addition, the rule was
made available through the Internet by the Office of the Federal
Register. A 60-day comment period ending March 13, 2006, was provided
to allow interested parties to respond to the rule. No comments were
received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance
guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
After consideration of all relevant material presented, including
the information and recommendation submitted by the Board and other
available information, it is hereby found that finalizing the interim
final rule, without change, as published in the Federal Register (71 FR
1921, January 12, 2006) will tend to effectuate the declared policy of
the Act.
List of Subjects in 7 CFR Part 982
Filberts, Hazelnuts, Marketing agreements, Nuts, Reporting and
recordkeeping requirements.
PART 982--HAZELNUTS GROWN IN OREGON AND WASHINGTON
0
Accordingly, the interim final rule amending 7 CFR part 982 which was
published at 71 FR 1921 on January 12, 2006, is adopted as a final rule
without change.
Dated: April 5, 2006.
Lloyd C. Day,
Administrator, Agricultural Marketing Service.
[FR Doc. 06-3417 Filed 4-10-06; 8:45 am]
BILLING CODE 3410-02-P