[Federal Register Volume 81, Number 116 (Thursday, June 16, 2016)]
[Rules and Regulations]
[Pages 39176-39182]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14333]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 930

[Doc. No. AMS-FV-15-0063; FV16-930-1 FR]


Tart Cherries Grown in the States of Michigan, et al.; Free and 
Restricted Percentages for the 2015-16 Crop Year for Tart Cherries

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule implements a recommendation from the Cherry Industry 
Administrative Board (Board) to establish free and restricted 
percentages for the 2015-16 crop year under the marketing order for 
tart cherries grown in the states of Michigan, New York, Pennsylvania, 
Oregon, Utah, Washington, and Wisconsin (order). The Board locally 
administers the marketing order and is comprised of producers and 
handlers of tart cherries operating within the production area. This 
action establishes the proportion of tart cherries from the 2015 crop 
which may be handled in commercial outlets at 80 percent free and 20 
percent restricted. In addition, this rule increases the carry-out 
volume of fruit to 55 million pounds for this season. These percentages 
should stabilize marketing conditions by adjusting supply to meet 
market demand and help improve grower returns.

DATES: Effective June 17, 2016.

FOR FURTHER INFORMATION CONTACT: Jennie M. Varela, Marketing 
Specialist, or Christian D. Nissen, Regional Director, Southeast 
Marketing Field Office, Marketing Order and Agreement Division, 
Specialty Crops Program, AMS, USDA; Telephone: (863) 324-3375, Fax: 
(863) 291-8614, or Email: [email protected] or 
[email protected].
    Small businesses may request information on complying with this 
regulation by contacting Antoinette Carter, Marketing Order and 
Agreement Division, Specialty Crops Program, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing 
Agreement and Order No. 930, both as amended (7 CFR part 930), 
regulating the handling of tart cherries produced in the States of 
Michigan, New York,

[[Page 39177]]

Pennsylvania, Oregon, Utah, Washington and Wisconsin, 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 Orders 12866, 13563, and 13175.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. Under the order provisions now in effect, free 
and restricted percentages may be established for tart cherries handled 
during the crop year. This final rule establishes free and restricted 
percentages for tart cherries for the 2015-16 crop year, beginning July 
1, 2015, through June 30, 2016.
    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 final rule establishes free and restricted percentages for the 
2015-16 crop year. This rule establishes the proportion of tart 
cherries from the 2015 crop which may be handled in commercial outlets 
at 80 percent free and 20 percent restricted. In addition, this rule 
increases the carry-out volume of fruit to 55 million pounds for 
calculation purposes for this season. This action should stabilize 
marketing conditions by adjusting supply to meet market demand and help 
improve grower returns. The carry-out and the final percentages were 
recommended by the Board at a meeting on September 10, 2015.
    Section 930.51(a) of the order provides authority to regulate 
volume by designating free and restricted percentages for any tart 
cherries acquired by handlers in a given crop year. Section 930.50 
prescribes procedures for computing an optimum supply based on sales 
history and for calculating these free and restricted percentages. Free 
percentage volume may be shipped to any market, while restricted 
percentage volume must be held by handlers in a primary or secondary 
reserve, or be diverted or used for exempt purposes as prescribed in 
Sec. Sec.  930.159 and 930.162 of the regulations. Exempt purposes 
include, in part, the development of new products, sales into new 
markets, the development of export markets, and charitable 
contributions. For cherries held in reserve, handlers would be 
responsible for storage and would retain title of the tart cherries.
    Under Sec.  930.52, only those districts with an annual average 
production of at least six million pounds are subject to regulation, 
and any district producing a crop which is less than 50 percent of its 
annual average is exempt. The regulated districts for the 2015-16 crop 
year are: District 1--Northern Michigan; District 2--Central Michigan; 
District 3--Southern Michigan; District 4--New York; District 7--Utah; 
District 8--Washington; and District 9--Wisconsin. Districts 5 and 6 
(Oregon and Pennsylvania, respectively) are not regulated for the 2015-
16 season.
    Demand for tart cherries and tart cherry products tends to be 
relatively stable from year to year. Conversely, annual tart cherry 
production can vary greatly. In addition, tart cherries are processed 
and can be stored and carried over from crop year to crop year, further 
impacting supply. As a result, supply and demand for tart cherries are 
rarely in balance.
    Because demand for tart cherries is inelastic, total sales volume 
is not very responsive to changes in price. However, prices are very 
sensitive to changes in supply. As such, an oversupply of cherries 
would have a sharp negative effect on prices, driving down grower 
returns. The Board, aware of this economic relationship, focuses on 
using the volume control provisions in the order to balance supply and 
demand to stabilize industry returns.
    Pursuant to Sec.  930.50 of the order, the Board meets on or about 
July 1 to review sales data, inventory data, current crop forecasts, 
and market conditions for the upcoming season and, if necessary, to 
recommend preliminary free and restricted percentages if anticipated 
supply would exceed demand. After harvest is complete, but no later 
than September 15, the Board meets again to update their calculations 
using actual production data, consider any necessary adjustments to the 
preliminary percentages, and determine if final free and restricted 
percentages should be recommended to the Secretary.
    The Board uses sales history, inventory, and production data to 
determine whether there is a surplus and, if so, how much volume should 
be restricted to maintain optimum supply. The optimum supply represents 
the desirable volume of tart cherries that should be available for sale 
in the coming crop year. Optimum supply is defined as average free 
sales for the prior three years plus desirable carry-out inventory. 
Desirable carry-out is the amount of fruit needed by the industry to be 
carried into the succeeding crop year to meet market demand until the 
new crop is available. Desirable carry-out is set by the Board after 
considering market circumstances and needs. Section 930.50(a) specifies 
that desirable carry-out can range from zero to a maximum of 20 million 
pounds but also authorizes the Board to establish an alternative carry-
out figure with the approval of the Secretary.
    In addition, USDA's ``Guidelines for Fruit, Vegetable, and 
Specialty Crop Marketing Orders'' (http://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders) 
specify that 110 percent of recent years' sales should be made 
available to primary markets each season before recommendations for 
volume regulation are approved. This requirement is codified in Sec.  
930.50(g) of the order, which specifies that in years when restricted 
percentages are established, the Board shall make available tonnage 
equivalent to an additional 10 percent of the average sales of the 
prior three years for market expansion (market growth factor).
    After the Board determines optimum supply, desirable carry-out, and 
the market growth factor, it must examine the current year's available 
volume to determine whether there is an oversupply situation. Available 
volume includes carry-in inventory (any inventory available at the 
beginning of the season) along with that season's production. If 
production is greater than the optimum supply minus carry-in, the 
difference is considered surplus. This surplus tonnage is divided by 
the sum of production in the regulated districts to reach a restricted 
percentage. This percentage must be held in reserve or used for 
approved diversion activities, such as exports.
    The Board met on June 25, 2015, and computed an optimum supply of 
208 million pounds for the 2015-16 crop year using the average of free 
sales for the three previous seasons and a desirable carry-out of 20 
million pounds. The Board then subtracted the estimated carry-in of 104 
million pounds from the optimum supply to

[[Page 39178]]

calculate the production needed from the 2015-16 crop to meet optimum 
supply. This number, 104 million pounds, was subtracted from the 
Board's estimated 2015-16 production of 233 million pounds to calculate 
a surplus of 129 million pounds of tart cherries. The surplus minus the 
market growth factor was then divided by the expected production in the 
regulated districts (228 million pounds) to reach a preliminary 
restricted percentage of 48 percent for the 2015-16 crop year.
    In discussing the calculations, industry participants commented 
that a carry-out of 20 million pounds would not meet their needs at the 
end of the season before the new crop is available. To address that 
concern, the Board recommended increasing the desirable carry-out to 55 
million pounds for the 2015-16 season. This change increased the 
optimum supply to 243 million pounds, reducing the surplus to 94 
million pounds.
    The Board also discussed whether the substantial reduction of 
supply in 2012 due to weather was still a factor that needed to be 
considered in determining optimum supply. Because of the crop loss, 
sales in 2012-13 reached only 123 million pounds, nearly 100 million 
pounds less than 2013-14 sales. In the previous two seasons when 
considering volume regulation, the Board recommended economic 
adjustments to account for the substantial decline in 2012. The Board 
again determined that the market required additional tonnage to 
continue recovering sales and voted to make an economic adjustment of 
43 million pounds to increase the available supply of tart cherries. 
The Board also complied with the market growth factor requirement by 
adding 19 million pounds (188 million pounds times 10 percent, rounded) 
to the free supply.
    The economic adjustment and market growth factor further reduced 
the preliminary surplus to 32 million pounds. After these adjustments, 
the preliminary restricted percentage was recalculated as 14 percent 
(32 million pounds divided by 228 million pounds).
    The Board met again on September 10, 2015, to consider establishing 
final volume regulation percentages for the 2015-16 season. The final 
percentages are based on the Board's reported production figures and 
the supply and demand information available in September. The total 
production for the 2015-16 season was 249 million pounds, 25 million 
pounds above the Board's June estimate. In addition, growers diverted 1 
million pounds in the orchard, leaving 248 million pounds available to 
market. Using the actual production numbers, and accounting for the 
recommended increase in desirable carry-out and economic adjustment, as 
well as the market growth factor, the restricted percentage was 
recalculated.
    The Board subtracted the carry-in figure used in June of 104 
million pounds from the optimum supply of 243 million pounds to 
determine 139 million pounds of 2015-16 production would be necessary 
to reach optimum supply. The Board subtracted the 139 million pounds 
from the actual production of 248 million pounds, resulting in a 
surplus of 109 million pounds of tart cherries. The surplus was then 
reduced by subtracting the economic adjustment of 43 million pounds and 
the market growth factor of 19 million pounds, resulting in an adjusted 
surplus of 47 million pounds. The Board then divided this final surplus 
by the actual production in the regulated districts (240 million 
pounds) to calculate a restricted percentage of 20 percent with a 
corresponding free percentage of 80 percent for the 2015-16 crop year, 
as outlined in the following table:

------------------------------------------------------------------------
                                                             Millions of
                                                                pounds
------------------------------------------------------------------------
Final Calculations:
  (1) Average sales of the prior three years...............          188
  (2) Plus desirable carry-out.............................           55
  (3) Optimum supply calculated by the Board...............          243
  (4) Carry-in as of July 1, 2015..........................          104
  (5) Adjusted optimum supply (item 3 minus item 4)........          139
  (6) Board-reported production............................          248
  (7) Surplus (item 6 minus item 5)........................          109
  (8) Total economic adjustments...........................           43
  (9) Market growth factor.................................           19
  (10) Adjusted surplus (item 7 minus items 8 and 9).......           47
    (11) Production from regulated districts...............          240
------------------------------------------------------------------------
                                                               Percent
                                                            ------------
Final Percentages:
  Restricted (item 10 divided by item 11 x 100)............           20
  Free (100 minus restricted percentage)...................           80
------------------------------------------------------------------------

    The primary purpose of setting restricted percentages is to attempt 
to bring supply and demand into balance. If the primary market is 
oversupplied with cherries, grower prices decline substantially. 
Restricted percentages have benefited grower returns and helped 
stabilize the market as compared to those seasons prior to the 
implementation of the order. The Board believes the available 
information indicates that a restricted percentage should be 
established for the 2015-16 crop year to avoid oversupplying the market 
with tart cherries. Consequently, based on its discussion of this issue 
and the result of the above calculations, the Board recommended final 
percentages of 80 percent free and 20 percent restricted by a vote of 
16 in favor and 1 against.
    During the discussion of the proposed restriction, some members 
expressed concern regarding competition from imported tart cherry juice 
concentrate. In particular, some were concerned that the additional 
volume from imports is not accounted for in the optimum supply formula, 
thus not capturing overall supply and demand. An economist from 
Michigan State University is working with the Board to assemble 
information on tart cherry imports. The Board also voted to establish 
an import committee to review the data on imports once it is available. 
Another member asserted that any restriction would adversely impact 
growers' ability to sell all of their fruit. One member also said that 
a 20 percent restriction seemed high given the moderate production in 
2015.
    One member noted that setting the restriction at 20 percent would 
aid in maintaining price stability, with another member reminding the 
Board of the importance of the order and volume control in avoiding 
oversupplying the market with tart cherries. One other member said it 
was also important to maintain a reserve in case of another crop 
disaster. Other members stated the demand adjustment and the 
recommended increased carry-out would put sufficient fruit on the 
market in the coming year.
    After reviewing the available data and considering the concerns 
expressed, the Board determined that a 20 percent restriction with a 
carry-out volume of 55 million pounds meets sales needs and establishes 
some reserves without oversupplying the market. Thus, the Board 
recommended establishing final percentages of 80 percent free and 20 
percent restricted. The Board could meet and recommend the release of 
additional volume during the crop year if conditions so warranted.

Final Regulatory Flexibility Analysis

    Pursuant to requirements set forth in the Regulatory Flexibility 
Act (RFA) (5 U.S.C. 601-612), 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.

[[Page 39179]]

    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and rules issued thereunder, are unique in that 
they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are approximately 600 producers of tart cherries in the 
regulated area and approximately 40 handlers of tart cherries who are 
subject to regulation under the order. Small agricultural producers are 
defined by the Small Business Administration (SBA) as those having 
annual receipts of less than $750,000, and small agricultural service 
firms have been defined as those whose annual receipts are less than 
$7,500,000 (13 CFR 121.201).
    According to the National Agricultural Statistics Service (NASS) 
and Board data, annual 2014-2015 tart cherry crop value was $106.745 
million. Dividing this figure by the number of producers (600) yields 
an average annual receipts per producer estimate of about $178,000. 
Since this is well below $750,000, it can be concluded that most tart 
cherry producers are small producers, according to the SBA criteria. In 
2014, The Food Institute estimated an f.o.b. price of $0.96 per pound 
for frozen tart cherries, which make up the majority of processed tart 
cherries. Multiplying tart cherry utilized production of 300.3 million 
pounds by $0.96 yields a handler-level annual receipts estimate of 
$288.3 million. Dividing this figure by the number of handlers (40) 
yields an average annual receipts per handler estimate of about $7.2 
million, which is below the SBA threshold for small agricultural 
service firms. Assuming a normal distribution, the majority of 
producers and handlers of tart cherries may be classified as small 
entities.
    The tart cherry industry in the United States is characterized by 
wide annual fluctuations in production. According to NASS, tart cherry 
production in 2012 was 85 million pounds, 294 million pounds in 2013, 
and in 2014, production was 304 million pounds. Because of these 
fluctuations, the supply and demand for tart cherries are rarely in 
balance.
    Demand for tart cherries is inelastic, meaning changes in price 
have a minimal effect on total sales volume as manufacturers do not 
easily substitute other fruits for tart cherry products. However, 
prices are very sensitive to changes in supply. Grower prices vary 
widely in response to the large swings in annual supply, ranging from a 
low of 7.3 cents per pound in 1987 to a high of 59.4 cents per pound in 
2012.
    Because of this relationship between supply and price, 
oversupplying the market with tart cherries would have a sharply 
negative effect on prices, driving down grower returns. The Board, 
aware of this economic relationship, focuses on using the volume 
control authority in the order in an effort to balance supply and 
demand in order to stabilize industry returns. This authority allows 
the industry to set free and restricted percentages as a way to bring 
supply and demand into balance. Unrestricted cherries can be marketed 
by handlers to any outlet, while a quantity corresponding to the 
restricted percentage must be held by handlers in reserve, diverted, or 
used for exempted purposes.
    This final rule establishes free and restricted percentages using 
an increased carry-out volume of 55 million pounds for the 2015-16 crop 
year under the tart cherry marketing order. This action establishes 
2015-16 percentages of 80 percent free and 20 percent restricted. These 
percentages should stabilize marketing conditions and help improve 
grower returns by adjusting supply to meet market demand. This action 
regulates tart cherries handled in Michigan, New York, Utah, 
Washington, and Wisconsin. The authority for this action is provided 
for in Sec. Sec.  930.51(a) and 930.52 of the order.
    This rule will result in some fruit being diverted from the primary 
domestic markets. However, as mentioned earlier, the USDA's 
``Guidelines for Fruit, Vegetable, and Specialty Crop Marketing 
Orders'' (http://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders) specify that 110 percent of recent 
years' sales should be made available to primary markets each season 
before recommendations for volume regulation are approved. The quantity 
that is available under this action is greater than 110 percent of the 
average quantity shipped in the prior three years.
    In addition, there are secondary uses available for restricted 
fruit, including the development of new products, sales into new 
markets, the development of export markets, and being placed in 
reserve. While these alternatives may provide different levels of 
return than the sales to primary markets, they play an important 
industry role. Restricted fruit is utilized for new products, new 
domestic markets, and development of export markets. In 2014-15, these 
activities accounted for 21 million pounds in sales, nearly 14 million 
of which were exports.
    Placing tart cherries into reserves is also a key part of balancing 
supply and demand. Although the industry must bear the handling and 
storage costs for fruit in reserve, reserves stored in large crop years 
are used to supplement supplies in short crop years. The reserves allow 
the industry to mitigate the impact of oversupply in large crop years, 
while allowing the industry to maintain and supply markets in years 
where production falls below demand. Further, storage and handling 
costs are more than offset by the increase in price when moving from a 
large crop to a short crop year.
    In addition, the Board recommended an increased carry-out of 55 
million pounds to reach an optimum supply of 243 million pounds. The 
recommended demand adjustment of an additional 43 million pounds will 
make the regulation less restrictive. Even with the recommended 
restriction, over 300 million pounds of fruit will be available to the 
domestic market. Consequently, it is not anticipated that this action 
will unduly burden growers or handlers.
    While this action could result in some additional costs to the 
industry, these costs are more than outweighed by the benefits. The 
purpose of setting restricted percentages is to attempt to bring supply 
and demand into balance. If the primary market (domestic) is 
oversupplied with cherries, grower prices decline substantially. 
Without volume control, the primary market will likely be oversupplied, 
resulting in lower grower prices.
    The three districts in Michigan, along with the districts in New 
York, Utah, Washington, and Wisconsin, are the restricted areas for 
this crop year with a combined total production of 240 million pounds. 
A 20-percent restriction means 192 million pounds are available to be 
shipped to primary markets from these five states. The 192 million 
pounds from the restricted districts, nearly 9 million pounds from the 
unrestricted districts (Oregon and Pennsylvania), and the 104 million 
pound carry-in inventory make a total of 305 million pounds available 
as free tonnage for the primary markets. This is similar to the 300 
million pounds of total utilized production in 2014-15 and is less 
restrictive than the 12 percent restriction in 2011-12, which made just 
under 262 million pounds available. Further, the Board could meet and 
recommend the release of additional volume during the crop year if 
conditions so warranted.

[[Page 39180]]

    Prior to the implementation of the order, grower prices often did 
not come close to covering the cost of production. The most recent 
costs of production determined by representatives of Michigan State 
University are an estimated $0.33 per pound. To assess the impact that 
volume control has on the prices growers receive for their product, an 
econometric model has been developed. Based on the model, the use of 
volume control would have a positive impact on grower returns for this 
crop year. With volume control, grower prices are estimated to be 
approximately $0.03 per pound higher than without restrictions.
    In addition, absent volume control, the industry could start to 
build large amounts of unwanted inventories. These inventories would 
have a depressing effect on grower prices. The econometric model shows 
for every 1 million-pound increase in carry-in inventories, the average 
grower price decreases by $0.003 per pound.
    Consumer prices largely do not reflect fluctuations in cherry 
supplies. Therefore, this rule should have little or no effect on 
consumer prices and should not result in a reduction in retail sales.
    The free and restricted percentages established by this rule 
provide the market with optimum supply and apply uniformly to all 
regulated handlers in the industry, regardless of size. As the 
restriction represents a percentage of a handler's volume, the costs, 
when applicable, are proportionate and should not place an extra burden 
on small entities as compared to large entities.
    The stabilizing effects of this action benefit all handlers by 
helping them maintain and expand markets, despite seasonal supply 
fluctuations. Likewise, price stability positively impacts all growers 
and handlers by allowing them to better anticipate the revenues their 
tart cherries would generate. Growers and handlers, regardless of size, 
benefit from the stabilizing effects of this restriction. In addition, 
the Board determined that increasing carry-out to 55 million pounds 
should provide processors enough fruit in the pipeline to meet market 
needs going into the next season.
    The Board considered some alternatives in its preliminary 
restriction discussions that affected this recommended action. The 
first alternative concerned the average sales in estimating demand for 
the coming season, and the second alternative regarded the recommended 
carry-out figure.
    Regarding demand, the Board began with the actual sales average of 
188 million pounds. There was concern, however, that this value, which 
incorporated the weather-related crop failure of 2012, would result in 
an over-restrictive calculation. After considering options in the range 
of 40 million to 62 million pounds, the Board determined that an 
adjustment of 43 million pounds, would best meet the industry's sales 
needs. Thus the other alternatives were rejected and the Board 
recommended the 43 million pound economic adjustment.
    Regarding the carry-out value, the Board previously considered a 
one-year increase above the 20 million pounds specified in the order to 
50 million pounds. However, this season, Board members indicated the 
carry-out should be even higher to facilitate processing at the end of 
the crop year. Board members suggested a series of options from 35 
million to 60 million pounds of carry-out. Some felt the additional 
fruit is necessary while others were more cautious about having 
additional fruit on the market at the time of harvest, which may put 
downward pressure on prices. In conjunction with the demand adjustment, 
the Board reached a consensus and recommended the Secretary increase 
the maximum carry-out to 55 million pounds for the 2015-16 season.
    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), the order's information collection requirements have been 
previously approved by the Office of Management and Budget (OMB) and 
assigned OMB No. 0581-0177, Tart Cherries Grown in the States of MI, 
NY, PA, OR, UT, WA, and WI. No changes in those requirements as a 
result of this action are necessary. Should any changes become 
necessary, they would be submitted to OMB for approval.
    This action will not impose any additional reporting or 
recordkeeping requirements on either small or large tart cherry 
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.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap, or 
conflict with this final rule. One of the public comments received did 
address the initial regulatory flexibility analysis. A review of that 
comment is included below as part of the review of all public comments 
received.
    AMS is committed to complying with the E-Government Act, to promote 
the use of the internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services, and for other purposes.
    In addition, the Board's meeting was widely publicized throughout 
the tart cherry industry, and all interested persons were invited to 
attend the meeting and participate in Board deliberations on all 
issues. Like all Board meetings, the June 25, 2015, and September 10, 
2015, meetings were public meetings, and all entities, both large and 
small, were able to express views on this issue. A proposed rule 
concerning this action was published in the Federal Register on 
December 17, 2015 (80 FR 78677). Copies of the rule were sent via email 
to all Board members and tart cherry handlers. Finally, the rule was 
made available through the internet by USDA and the Office of the 
Federal Register. A 30-day comment period ending January 19, 2015, was 
provided to allow interested persons to respond to the proposal.
    Nine comments were received during the comment period in response 
to the proposal. The commenters included both growers and handlers, and 
all opposed the proposed regulation. Most of the points made by the 
commenters had been discussed prior to the Board's vote.
    All nine comments made reference to imported tart cherries. Five 
commenters referred to figures retrieved from the Foreign Agricultural 
Service's Global Agricultural Trade System (GATS) which indicates an 
equivalent of more than 200 million pounds of cherries were imported 
into the U.S. in 2014. The data do indicate that imported volume has 
grown. The data also indicate tart cherry juice concentrate represents 
by far the largest segment of imports, which according to the data, has 
experienced tremendous growth beginning in 2012.
    Several of the commenters indicated that the proposed volume 
restriction would restrict their chances of gaining some of the market 
share attributed to imports. While the domestic industry did experience 
a significant drop in shipments in 2012 due to a weather-related 
incident, with the exclusion of that year, shipments of domestic tart 
cherries have routinely exceeded 200 million pounds. Given the rapid 
increase in the import volume of tart cherry juice and the level of 
domestic shipments, the vast majority of imported tart cherry juice is 
going to new markets not previously served by the domestic industry. At 
the very least, these new markets serviced by imported tart cherry 
juice far exceed the estimated 47 million

[[Page 39181]]

pounds of tart cherries that are restricted by this regulation.
    As such, should domestic handlers decide to compete in these new 
markets, in most cases, restricted cherries could be used and the 
handler could receive diversion credits under the new market and market 
expansion provisions provided under the order. Further, the Board 
recently recommended and USDA approved extending diversion credits for 
new markets and market expansion from one year to three years, creating 
even more opportunities to pursue these new markets. Consequently, 
handlers would have ample opportunity to compete for new markets using 
restricted cherries while continuing to service traditional markets 
with free cherries. In addition, should industry efforts cause demand 
to exceed existing volume, the Board could meet and recommend the 
release of additional volume.
    Two other commenters indicated imported tart cherries should be 
included as part of the process for calculating free and restricted 
percentages. Under the order, when computing and determining 
percentages for recommendation to USDA, the Board is required to give 
consideration to several factors, including supplies of competing 
commodities and the economic factors having a bearing on the marketing 
of cherries. The Board's discussion regarding establishing free and 
restricted percentages for this season included considerable discussion 
regarding imported tart cherries. Concerns were raised and discussed 
regarding the impact of imported tart cherries on the market and how 
that would impact a restriction. Discussion also included an estimated 
price point for imported tart cherry juice as a comparison with that 
for domestic production. It was also indicated that the Board was 
working to assemble additional information on tart cherry imports, and 
the Board voted to establish an import committee to review the import 
data.
    However, in the Board discussion, comments were also made regarding 
the importance of the order and volume control in avoiding 
oversupplying the market with tart cherries. The importance of 
maintaining a reserve in case of another crop failure was also 
expressed. Other Board members also stated the demand adjustment and 
the recommended increased carry-out would put sufficient fruit on the 
market for the coming year. After discussing the available information 
on imported product and considering the concerns expressed, no motion 
was made to include an additional adjustment to the calculations based 
on imported fruit.
    Two comments stated that restriction has contributed to the loss of 
market share to imports, with one requesting USDA reconsider the 
economic impact of this regulation under the RFA with regard to 
imports. Aside from a reference to the volume of imported tart 
cherries, neither comment provided any data in support of these 
assertions. Based on the information from GATS, tart cherry imports 
increased substantially beginning in 2012. For 2011-12, the season 
prior to the season with a significant crop loss due to weather, total 
shipments were 264 million pounds, with 213 million pounds coming from 
free sales. While the reduced crop for 2012-13 season had total sales 
of 123 million pounds, in the years following, sales rebounded to 222 
million pounds in 2013-14 (no volume restriction) and to 235 million 
pounds total sales in 2014-15. The free sales for 2014-15 season were 
actually higher than those for the 2011-12 season at 214 million.
    The utilization numbers as reported by NASS have also been 
increasing from approximately 230 million pounds in 2011 to 290 million 
pounds in 2013 and to 298 million pounds in 2014. In addition, the NASS 
numbers show the frozen segment, the largest utilization of domestic 
tart cherries, increased from 154 million pounds in 2011 to 158 million 
pounds in 2013 and to 199 million pounds in 2014. The other category as 
reported by NASS, which includes juice and dried cherries, also 
experienced higher numbers in 2013 and 2014 as compared to 2011. The 92 
million pounds and 66 million pounds utilized in 2013 and 2014, 
respectively, are substantially higher than the 37 million pounds 
utilized in 2011.
    Further, with the exception of the 2012-13 season, grower prices 
have been relatively stable. In 2011, NASS reported an average grower 
price for domestic tart cherries of $0.298. For the years 2013 and 
2014, NASS reported average grower prices of $0.359 and $0.355 per 
pound, respectively. The figures for 2015 are not yet available.
    As previously stated, the demand for tart cherries is inelastic, 
such that changes in price have minimal effect on total sales volume, 
yet prices are very sensitive to changes in supply. This is 
demonstrated by the sharp jump in average grower price in 2012 to 
$0.594 per pound with the substantial decrease in domestic supply. 
Given that GATS reports tart cherry imports as approximately 217 
million pounds in 2012, 130 million pounds in 2013, and 244 million 
pounds in 2014, there should be some downward pressure on price if this 
volume was competing directly for the same market serviced by the 
domestic tart cherry industry. However, this is not reflected in the 
available numbers. Using the available sales, utilization, and price 
data, it is difficult to determine what, if any, specific impact 
imports have had on the market for domestic tart cherries.
    Five comments mentioned the financial burden a restriction would 
place on growers and handlers. The RFA analysis recognizes that the 
industry bears a cost when keeping product off the market, but also 
notes that the gains in prices and stability outweigh that cost. 
Further, placing tart cherries into reserves is an important part of 
balancing supply and demand. Although there are costs associated with 
the storage of fruit, reserves allow the industry to mitigate the 
impact of oversupply in large production years while helping to 
maintain and supply markets in years where production falls short or 
when there are crop failures as in 2002 and 2012. Storage costs are 
more than offset by the increase in price during years with a short 
crop as evidenced by the average grower price in 2012. As mentioned in 
the RFA, the restriction is expected to have a positive impact on 
price.
    While none of the comments suggested an alternative percentage for 
a volume restriction, most suggest that there should be no restriction. 
The formula used by the Board in recommending the proposed regulation 
is based, in part, on sales history. The Board has taken steps to 
recommend putting additional fruit on the market as carry-out both in 
this action and in the previous season's regulation. In 2014, the Board 
recommended a carry-out of 50 million pounds yet entered the 2015-16 
season with 104 million pounds of unrestricted fruit on the market. In 
addition, USDA purchased over 20 million pounds of cherry products 
since 2014 as emergency surplus purchases, and has announced plans to 
purchase up to 60 million pounds of tart cherry products in 2016.
    For the 2015-16 season, the Board recommended an increase in the 
carry-out to 55 million pounds, made an economic adjustment to add an 
additional 43 million pounds to available supply, and an additional 19 
million pounds were added under the market growth factor. With these 
adjustments, there are more than 305 million pounds of tart cherries 
available for free sales for 2015-16. This volume exceeds total sales 
from 2011-12 of both free and restricted cherries of 264 million 
pounds, the last season before

[[Page 39182]]

the crop disaster in 2012. Further, the order provides numerous 
alternatives for the use of restricted fruit, such as handler 
diversion, for complying with the recommended restriction. Therefore, 
as stated in the RFA, it is not anticipated that this action will 
unduly burden growers or handlers.
    Additional concerns raised in the comments pertain to pending 
litigation or issues not applicable to the proposed rule.
    Accordingly, no changes will be made to the rule as proposed, based 
on the comments 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/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Antoinette Carter at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Committee and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because handlers are already shipping 
tart cherries from the 2015-16 crop. Further, handlers are aware of 
this rule, which was recommended at a public meeting. Also, a 30-day 
comment period was provided for in the proposed rule.

List of Subjects in 7 CFR Part 930

    Marketing agreements, Reporting and recordkeeping requirements, 
Tart cherries.

    For the reasons set forth in the preamble, 7 CFR part 930 is 
amended as follows:

PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK, 
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN

0
1. The authority citation for part 930 continues to read as follows:

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


0
2. Section 930.151 is revised to read as follows:


Sec.  930.151  Desirable carry-out inventory.

    For the crop year beginning on July 1, 2015, the desirable carry-
out inventory, for the purposes of determining an optimum supply 
volume, will be 55 million pounds.

0
3. Section 930.256 is revised to read as follows:


Sec.  930.256  Free and restricted percentages for the 2015-16 crop 
year.

    The percentages for tart cherries handled by handlers during the 
crop year beginning on July 1, 2015, which shall be free and 
restricted, respectively, are designated as follows: Free percentage, 
80 percent and restricted percentage, 20 percent.

    Dated: June 13, 2016.
Dana Coale,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2016-14333 Filed 6-15-16; 8:45 am]
 BILLING CODE 3410-02-P