[Federal Register Volume 83, Number 177 (Wednesday, September 12, 2018)]
[Rules and Regulations]
[Pages 46069-46075]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-19825]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 83, No. 177 / Wednesday, September 12, 2018 /
Rules and Regulations
[[Page 46069]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 929
[Doc. No. AMS-SC-18-0012; SC18-929-2 FR]
Cranberries Grown in States of Massachusetts, et al.;
Establishment of 2018-19 Seasonal Volume Regulation
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule implements a recommendation to establish a grower
allotment percentage for the 2018-19 crop year and allows for the
diversion of processed products from that year under the marketing
order for cranberries grown in the production area (Order). This action
also specifies handlers subject to the regulation, revises the
definition of outlets for excess fruit, revises dates by which certain
actions are due, and establishes exemptions to the action.
DATES: Effective October 12, 2018.
FOR FURTHER INFORMATION CONTACT: Doris Jamieson, 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 Richard Lower, 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, pursuant to 5 U.S.C. 553,
amends regulations issued to carry out a marketing order as defined in
7 CFR 900.2(j). This final rule is issued under Marketing Agreement and
Order No. 929, as amended (7 CFR part 929), regulating the handling of
cranberries grown in the States of Massachusetts, Rhode Island,
Connecticut, New Jersey, Wisconsin, Michigan, Minnesota, Oregon,
Washington, and Long Island in the State of New York. Part 929
(referred to as 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 Cranberry Marketing
Committee (Committee) locally administers the Order and is comprised of
growers of cranberries operating within the production area, and a
public member.
The Department of Agriculture (USDA) is issuing this final rule in
conformance with Executive Orders 13563 and 13175. This action falls
within a category of regulatory actions that the Office of Management
and Budget (OMB) exempted from Executive Order 12866 review.
Additionally, because this final rule does not meet the definition of a
significant regulatory action, it does not trigger the requirements
contained in Executive Order 13771. See OMB's Memorandum titled
``Interim Guidance Implementing Section 2 of the Executive Order of
January 30, 2017 titled `Reducing Regulation and Controlling Regulatory
Costs'[thinsp]'' (February 2, 2017).
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Order provisions provide that the Committee may
recommend and implement, subject to USDA approval, volume control
regulation which would decrease the available supply of cranberries
whenever the Secretary of Agriculture (Secretary) finds that ``such
regulation will tend to effectuate the declared policy of the Act.''
Accordingly, this rule establishes a marketable quantity and grower
allotment percentage for cranberries produced during the 2018-19 crop
year, beginning September 1, 2018, and ending August 31, 2019.
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 a marketable quantity and grower
allotment percentage for the 2018-19 crop year. This rule is the result
of the Committee's recommendations made during its August 4, and August
31, 2017, meetings, and a February 18, 2018, email vote. This rule
establishes a marketable quantity of 7.275 million barrels and a grower
allotment percentage of 75 percent. This action also allows handlers to
process up to 50 percent of the excess cranberries they receive above
their growers' allotment, provided they divert an equivalent amount of
2018-19 cranberry processed products. It also establishes an exemption
for organically grown cranberries, specifies handlers subject to the
regulation, revises the definition of outlets for excess fruit, and
revises dates by which certain actions are due.
The Committee also recommended an exemption for organically grown
cranberries, and an exemption of 2,500 barrels for each grower. After
much consideration, USDA determined the recommended grower exemption of
2,500 barrels should be revised. Consequently, this final rule does not
include the exemption of 2,500 barrels for each grower and instead
exempts handlers that processed less than 125,000 barrels during the
2017-18 fiscal year, or handlers that did not have carryover inventory
at the end of the 2017-18 fiscal year. Accordingly, growers delivering
their fruit to exempt handlers are not subject to the allotment.
In addition, in a February 18, 2018, vote by email, the Committee
voted unanimously to adjust reporting dates associated with the
allotment regulation. These changes were previously discussed and
supported by the Committee at a meeting on April 22,
[[Page 46070]]
2014, as part of the consideration of another volume regulation for
which a rule was not issued.
The recommendations included in this rule will adjust supply to
more closely meet market demand, improve grower and handler returns,
and help reduce inventory.
Sections 929.49 and 929.52 provide, in part, authority to establish
a marketable quantity and grower allotment percentage. Section 929.14
defines marketable quantity as the volume of cranberries needed to meet
market demand and provide for an adequate carryover into the next
season. The allotment percentage is derived by dividing the marketable
quantity by the total of all growers' sales histories. Section 929.48
outlines procedures for computing a grower's sales history.
Section 929.49 also prescribes how the grower allotment percentage
is calculated and distributed to growers and handlers. Each grower's
allotment volume is calculated by multiplying the individual's sales
history by the allotment percentage. A grower's allotment is the total
volume a handler may purchase from, or handle on behalf of, that grower
during a year of volume regulation. Cranberries received by a handler
that exceed the sum of their growers' allotments can be used to fill
unused allotment. Any remaining cranberries are defined as excess
cranberries as defined in Sec. 929.59, which also outlines the
procedures and dates by which excess cranberries are to be diverted.
Section 929.61 prescribes outlets for excess cranberries, which are
further defined in Sec. 929.104.
In addition, Sec. 929.50 provides authority for the transfer of
sales history and annual allotment. Section 929.51 requires the
Committee to consider market conditions, including supply and demand,
prior to recommending an allotment percentage, and that any
recommendation be made by March 1. Section 929.58(a) provides the
authority to exempt from any or all requirements the handling of
cranberries in such minimum quantities as the Committee, with the
approval of the Secretary, may prescribe. Section 929.58(b) provides,
in part, the authority to exempt from any or all requirements the
handling of cranberries of such forms or types, including organic
cranberries, as the Committee, with the approval of the Secretary, may
prescribe.
Domestic cranberry production has been increasing over the past few
years, up from 8.0 million barrels in 2012 to 9.6 million barrels in
2016. During the last few years, demand has remained relatively flat,
and has not kept pace with the increases in supply. This has led to
increasing levels of inventories. Ending inventory levels increased
from 5.8 million barrels in 2012 to 9.7 million barrels in 2016.
Demand for cranberries is inelastic, meaning changes in consumer
price have a minimal effect on total sales. However, grower prices are
very sensitive to changes in supply. Consequently, higher inventory
levels place downward pressure on grower prices for cranberries and
reduce grower returns. Data reviewed by the Committee indicates that
the price per barrel received by some growers has fallen from $30 a
barrel in 2011 to $10 a barrel in 2016. With the cost of production
estimated at approximately $35 a barrel, for many growers returns have
fallen below the cost of production.
The Committee met on August 4, 2017, and again on August 31, 2017,
and discussed the estimated levels of supply and demand and how market
conditions were impacting the industry. The Committee discussed the
approximate levels of production for the 2017-18 season, forecasting
production at approximately 9.1 million barrels. Carryover inventory
was estimated at approximately 9.9 million barrels and foreign acquired
cranberries were expected to provide an additional 2.1 million barrels,
for a total available supply of approximately 21.1 million barrels for
the year. After accounting for shrinkage, the Committee agreed on an
adjusted supply of 20.4 million barrels for the 2017-18 crop year.
Using these numbers, with estimated sales of 9.5 million barrels
for 2017-18, the Committee calculated a potential carryover for the
2018-19 season of 10.9 million barrels. This is an approximately one
million barrel increase from the carryover inventory for the 2017-18
crop year. Based on these numbers, carryover inventory for the 2018-19
crop year would be approximately 115 percent of annual sales.
In discussing market conditions, the Committee recognized that
sales have been relatively flat. The Committee also noted supply has
been exceeding demand by about one million barrels a year. Using crop
and sales estimates similar to 2017-18, and the estimated carryover
from the 2017-18 season of 10.9 million barrels, the potential
carryover supply at the end of the 2018-19 crop year could increase by
another one million barrels to 11.9 million if no action is taken to
regulate supply.
In reviewing these numbers, the Committee agreed the industry is
faced with a large inventory that continues to build. To address the
problems associated with oversupply and to try to stabilize grower
returns, the Committee discussed the need to establish volume
regulation. The Committee considered several options, including
establishing free and restricted percentages under a handler
withholding for the 2017-18 crop year, establishing a grower allotment
for the 2018-19 season, or recommending both regulations.
Considering the levels of inventory and low grower returns, the
Committee voted to recommend a handler withholding, setting the free
and restricted percentages of 85 percent and 15 percent, respectively,
for the 2017-18 season. AMS agreed with the Committee's analysis and
recommendation and published the rule establishing these percentages in
the Federal Register on April 4, 2018 (83 FR 14350). The Committee
estimated that the 15 percent restriction would remove approximately
one million barrels from inventory, helping to maintain inventories at
current levels. While the Committee recognized a small restriction
would not immediately balance supply with demand, even a small
restriction would remove a portion of the volume from the market and
help prevent an additional increase in inventory.
With the handler withholding removing an estimated one million
barrels from the market, the industry would still have approximately 10
million barrels remaining in inventory. Given the static demand and
anticipated market conditions for the 2018-19 fiscal year, the
Committee also recommended establishing a grower allotment percentage
for the 2018-19 fiscal year.
The Committee discussed various levels of restriction, being
sensitive to the impact volume control could have on small growers and
handlers. Some small handlers are able to sell all their production
each year and do not maintain an inventory. Several Committee members
stated a large restriction would place a hardship on these small
handlers. However, the Committee also recognized that volume control
measures could help increase grower returns by helping to align supply
with demand.
In addition, establishing an allotment regulation can help growers
reduce production costs. Growers could choose to take bogs out of
production, or reduce inputs such as fertilizer and pesticides in order
to reduce their production volume to match their allotment. These and
other steps could help growers reduce their costs of production for the
2018-19 crop.
Based on the information available, the Committee recommended
[[Page 46071]]
establishing a marketable quantity of 7.275 million barrels and an
allotment percentage of 75 percent for the 2018-19 crop year. With
volume regulation, returns are expected to be higher than without
volume regulation. This increase is beneficial to all growers and
handlers regardless of size, and enhances total revenues in comparison
to no volume regulation. Establishing an allotment percentage allows
the industry to help stabilize supplies. This rule could remove a
potential 2 million barrels from supply, reduce industry inventory, and
increase industry returns. This rule adds a new Sec. 929.253 to
establish the marketable quantity and grower allotment.
The Committee also recommended that handlers have the option to
receive cranberries over their grower allotment and process up to 50
percent of the excess cranberries received rather than divert them in
fresh form, as currently required. Handlers that do so need to divert
an amount of 2018-19 cranberry processed products equivalent to the
volume of excess cranberries processed.
The Committee made this recommendation recognizing that processing
fresh fruit to produce one of its top-selling items, sweetened dried
cranberries (SDC), results in juice concentrate as a by-product. A
significant amount of current inventory is in the form of juice
concentrate. By allowing handlers to process a portion of the excess
cranberries they receive, more fresh cranberries are available to
produce products requiring whole cranberries, such as SDC, and the
diversion of concentrate will help prevent additional build-up of
inventory. Handlers still have the option to divert fresh berries as
excess supply.
To allow for the diversion of processed products, Sec. 929.104(b),
which currently prohibits the handling of excess fruit, is removed. To
ensure the diversion of processed products in lieu of fresh cranberries
is correctly accounted for, the final rule for volume regulation for
the 2017-18 season (83 FR 14350) adds guidance under Sec. 929.107
along with a conversion table. The table recognizes different
conversion equivalencies of cranberries to processed product based on
the volume of Brix concentrate.
Brix is the method for measuring the amount of sugar contained in
the cranberry products, and the industry average for concentrate is 50
Brix. The Committee acknowledged that the Brix level can vary depending
on the growing region and farming practices. The table helps ensure
that the diversion of processed product in lieu of fresh berries is
applied equitably among all handlers.
Using the conversion table, handlers can determine the amount of
cranberry concentrate they need to divert, in lieu of fresh berries, to
cover the fresh cranberry equivalent of any excess cranberries
processed. Juice concentrate should comprise the vast majority of
processed product used for diversion. Should requests be made to use
other processed products for diversion, conversion rates for those
products will be provided by the Committee based on information
provided by the requesting handler.
For example, a grower with a sales history of 1,000 barrels will
have an allotment of 750 barrels (1,000 x .75). If the grower delivered
all 1,000 barrels to the handler, the handler will have 250 barrels of
excess fruit. Under this final rule, the handler could divert 250
barrels of fresh fruit to approved outlets or divert half (125 barrels
of fresh fruit) and process half, diverting a 125 barrel equivalent in
2018-19 processed product.
The Committee also recommended changes to date requirements
currently specified in the Order. Section 929.59(b) currently states
that ``prior to January 1, or such other date as recommended by the
committee and approved by the Secretary, handlers holding excess
cranberries shall submit to the committee a written plan outlining
procedures for the systematic disposal of such cranberries in the
outlets prescribed in Sec. 929.61.'' The Committee agreed the date for
submitting disposal plans should be extended in order to give handlers
more time to consider how to divert their excess cranberries.
Therefore, the Committee recommended changing the deadline prescribed
in Sec. 929.59(b) from January 1 to March 1 of the regulated season.
Section 929.59(c) states that ``prior to March 1, or such other
date as recommended by the committee and approved by the Secretary, all
excess cranberries shall be disposed of pursuant to Sec. 929.61.''
Given the change in the due date for the diversion plans, the Committee
agreed that this date should also be changed to provide handlers with
enough time to comply with this requirement. Therefore, the Committee
recommended changing the date by which diversion is to be completed
from March 1 to August 31. AMS agrees with the Committee's analysis and
recommendation and is issuing this rule to add a new Sec. 929.159 to
make these date changes.
Section 929.62(a) requires each grower to file a report with the
Committee by January 15 of each year providing the following
information: Total acreage harvested and whether owned or leased; total
commercial cranberry sales in barrels from such acreage; the amount of
acres either in production but not harvested, or taken out of
production, and the reason(s) why; the amount of new or replanted
acreage coming into production; the name of the handler(s) to whom
commercial cranberry sales were made; and such other information as may
be needed for implementation and operation of this section. Growers
might not have all necessary information to complete the report by the
current deadline. Therefore, the Committee recommended changing the
grower reporting date from January 15 to March 1.
The Committee also recommended organically grown cranberries be
exempt from this regulation as they serve a niche market and represent
a very small portion of the total crop. All other cranberry production,
including fresh cranberries, are subject to regulation under the grower
allotment volume regulation.
To address the burden the volume regulation would have on small
growers and handlers, the Committee also recommended providing an
exemption of 2,500 barrels for all growers. Under the Committee's
recommendation, the exemption would be applied following the
calculation of a grower's allotment. However, after much consideration,
USDA determined the exemption recommendation should be revised. Rather
than provide an exemption of 2,500 barrels for each grower, this action
exempts small handlers who processed less than 125,000 barrels from the
allotment requirement. Further, handlers who did not have carryover
inventory at the end of the 2017-18 fiscal year are also exempt from
the allotment requirement. Accordingly, growers delivering their fruit
to exempt handlers are not subject to the allotment.
These changes allow handlers who have matched their production with
market demand to continue to serve their customer base and maintain
their market share. Small growers also have the option of delivering
their fruit to handlers who are not subject to the regulation. Handlers
subject to the allotment percentage should be able to meet any market
shortfalls by utilizing cranberries or cranberry products available in
inventory. The provision allowing handlers to process a portion of
their excess cranberries also helps provide some flexibility.
With this action, only those handlers carrying inventory are
subject to
[[Page 46072]]
meeting the allotment requirement. In reviewing the Committee's
recommendation and other available industry information, USDA has
determined that existing inventories in excess of 9 million barrels are
putting the most downward pressure on returns to both growers and
handlers. Consequently, this rule puts more focus on reducing the
volume in inventory.
Section 929.125 provides authority for a grower to request a review
by an appeals subcommittee if the grower is dissatisfied with his or
her sales history calculation provided by the Committee. The grower
must request the review within 30 days after receipt of the Committee's
determination of sales history and must submit documentation showing
why he or she believes the calculation is inaccurate. Within 15 days
after notification of the appeals subcommittee's decision, if the
grower is not satisfied with the decision, the grower may further
appeal to the Secretary.
A grower may transfer all or part of their allotment to another
grower, provided that the transferred allotment remains assigned to the
same handler. Transfers of allotment between growers having different
handlers may occur with the consent of both handlers. All such
transfers have to be reported to the Committee. After all allotment
transfers have occurred, any unused allotment would be transferred to
the Committee. The Committee would then redistribute any unused
allotment to handlers having excess cranberries in an amount
proportionate to each handler's total allotment. These provisions help
ensure that excess supply is utilized, to the extent possible, through
unfilled allotment.
The Committee considered the estimated level of production and
anticipated demand, and determined that without some action on the part
of the Committee, inventory levels will continue to increase throughout
the 2018-19 season. The Committee believes using the volume control
authorities in the Order will help stabilize marketing conditions for
cranberries by helping to adjust supply to meet market demand and
improve grower returns.
Accordingly, this final rule establishes a grower allotment at 75
percent for the 2018-19 season. It also gives handlers the option to
process up to 50 percent of the excess cranberries they receive above
their growers' allotment, provided they divert an equivalent amount of
2018-19 cranberry processed products. This final rule also exempts
organically grown cranberries, specifies handlers subject to the
regulation, revises the definition of outlets for excess fruit, and
revises dates by which certain actions are due.
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.
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 1,100 cranberry growers in the regulated
area and approximately 65 cranberry handlers subject to regulation
under the Order. Small agricultural growers are defined by the Small
Business Administration (SBA) as those having annual receipts of less
than $750,000, and small agricultural service firms are defined as
those whose annual receipts are less than $7,500,000 (13 CFR 121.201).
According to industry and Committee data, the average grower price
for cranberries during the 2016-17 season was $23.50 per barrel and
total sales were approximately 9.5 million barrels. The value for
cranberries that year totaled $223,250,000 ($23.50 per barrel
multiplied by 9.5 million barrels). Taking the total value of
production for cranberries and dividing it by the total number of
cranberry growers provides an average return per grower of $202,955.
Using the average price and utilization information, and assuming a
normal distribution, the majority of cranberry growers receive less
than $750,000 annually.
According to USDA's Market News report, the average free on board
(f.o.b.) price for cranberries was approximately $30.00 per barrel.
Multiplying the f.o.b. price by total utilization of 9.5 million
barrels results in an estimated handler-level cranberry value of $285
million. Dividing this figure by the number of handlers (65) yields an
estimated average annual handler receipt of $4.3 million, which is
below the SBA threshold for small agricultural service firms.
Therefore, the majority of growers and handlers of cranberries may be
classified as small entities.
While cranberry production has continued to rise, demand has failed
to keep pace, and inventories have been increasing. In an industry such
as cranberries, product can be stored in inventory for long periods of
time. Large inventories are costly to maintain, difficult to market,
and have a price-depressing effect. When supply outpaces demand and
results in high levels of inventories, grower and handler returns can
be negatively impacted.
Demand for cranberries is inelastic, meaning changes in price have
a minimal effect on total sales volume. However, grower prices are very
sensitive to changes in supply. A grower allotment program results in a
decrease in supply as handlers can only purchase a portion of a
grower's production, which is based on the grower's past sales history.
Even a small shift in supply can have a positive effect on grower
prices. Therefore, using a grower allotment program to reduce supply
should increase grower prices and revenues.
This final rule establishes a grower allotment of 75 percent for
the 2018-19 crop year. It also allows handlers to process up to 50
percent of the excess cranberries they receive above their growers'
allotment, provided they divert an equivalent amount of 2018-19
cranberry processed products. In addition, this rule exempts
organically grown cranberries, specifies handlers subject to the
regulation, revises the definition of outlets for excess fruit, and
revises dates by which certain actions are due. These actions are
designed to help stabilize marketing conditions, reduce burdensome
inventories, and improve grower and handler returns. This rule revises
Sec. Sec. 929.104 and 929.105 and establishes new Sec. Sec. 929.159
and 929.253. The authority for these actions is provided for in
Sec. Sec. 929.48, 929.49, 929.51, 929.52, 929.58, 929.59, 929.61, and
929.62. These changes are based on Committee recommendations from
meetings on August 4 and August 31, 2017, and a February 18, 2018,
email vote.
While these actions could result in some additional costs to the
industry, the benefits are expected to outweigh them. The purpose of
establishing an allotment percentage is to address oversupply
conditions and to stabilize grower prices. The industry has a
significant volume in inventory, and this has had a negative impact on
grower and handler returns. Without volume control, inventories will
likely continue to increase, further lowering returns.
[[Page 46073]]
Inventories have significantly increased since 2011. In 2011,
existing inventories were around 4.6 million barrels. By the end of the
2016-17 season, inventories were approximately 9.9 million barrels, and
by the end of the 2017-18 season, inventories are projected to be
approximately 10.9 million barrels. Inventories as a percentage of
total sales have also been increasing from approximately 50 percent in
2010 to approximately 103 percent in 2016, and could reach an
anticipated 115 percent after the 2017-18 season. These inventories
have had a depressing effect on grower prices, which for many growers
have fallen below their cost of production.
Retail demand for cranberries is highly inelastic, which indicates
changes in consumer prices do not result in significant changes in the
quantity demanded. Consumer prices are also not significantly impacted
by minor changes in cranberry supplies. Therefore, this action should
have little or no effect on consumer prices and should not result in a
reduction in retail sales. However, even a small shift in supply could
increase grower and handler returns. The use of allotment percentages
will likely have a positive impact on grower and handler returns for
this crop year.
This rule will result in some fruit being taken off the market.
However, a sufficient amount of fruit will still be available to supply
all aspects of the market. In addition, allowing handlers the option to
process up to 50 percent of the excess cranberries they receive above
their growers' allotment, provided they divert an equivalent amount of
2018-19 cranberry processed products, provides handlers some additional
flexibility and may help reduce inventories of juice concentrate, one
of the largest segments of existing inventory.
There are also secondary outlets available for excess fruit,
including foreign markets except Canada, charitable institutions,
nonhuman food use, and research and development projects. While these
alternatives may provide different levels of return than sales to
primary markets, they play an important role for the industry. In
addition, if demand is greater than anticipated, there are significant
amounts of fruit in inventory that can be utilized to meet demand.
This action also exempts small handlers who processed less than
125,000 barrels in 2017-18 from the allotment percentage. Consequently,
small handlers whose acquired volume is 125,000 barrels or less are
exempt from the allotment volume restriction. This will reduce the
burden the volume restriction has on small handlers and their growers.
In addition, handlers who did not have carryover inventory at the
end of the 2017-18 fiscal year are also exempt from the allotment
percentage. This allows handlers that have matched their production
with market demand to continue to serve their customer base and
maintain their market share. Handlers subject to the restriction should
be able to meet any shortfalls by utilizing cranberries or cranberry
products they have in inventory.
Further, making the recommendation to regulate the volume handled
under a grower allotment program could result in some cost savings for
growers depending upon what actions they may take to adjust supply.
As the allotment represents a percentage of the grower's sales
history, the costs, when applicable, are proportionate and should not
place an extra burden on small entities as compared to large entities.
Likewise, growers and handlers, regardless of size, benefit from the
stabilizing effects of this action.
One alternative considered by the Committee was not to impose a
volume regulation during the 2018-19 crop year. However, Committee
members believed that inventory levels were such that some form of
volume control was necessary to help stabilize marketing conditions.
The Committee also considered other allotment percentage levels.
However, some members were concerned that setting an allotment
percentage that was too restrictive could negatively impact small
growers. The Committee also considered not recommending a provision to
allow a percentage of excess cranberries to be processed into cranberry
products. The Committee determined that allowing handlers to process up
to 50 percent of the excess cranberries they receive above their
growers' allotment would provide additional volumes of fresh
cranberries for processing and would provide handlers some flexibility
while not adding additional juice concentrate to the existing inventory
levels. Therefore, for the reasons mentioned above, these alternatives
were rejected by the Committee.
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 OMB and assigned OMB No. 0581-0189, Fruit Crops.
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 final rule will not impose any additional reporting or
recordkeeping requirements on either small or large cranberry growers
or 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.
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 Committee's meetings were widely publicized
throughout the cranberry industry and all interested persons were
invited to attend the meetings and participate in Committee
deliberations on all issues. Like all Committee meetings, the August 4,
2017 and August 31, 2017 meetings were public meetings and all
entities, both large and small, were able to express views on these
issues.
A proposed rule concerning this action was published in the Federal
Register on April 27, 2018 (83 FR 18462). Copies of the proposed rule
were sent via email to Committee members and cranberry handlers.
Additionally, the rule was made available through the internet by USDA
and the Office of the Federal Register. A 30-day comment period ending
May 29, 2018, was provided to allow interested persons to respond to
the proposal.
During the comment period, 24 comments were received in response to
the proposal. Of the comments received, 12 were in support of the
regulation, but also requested some changes to the proposal, 11 were
opposed to the regulation, and 1 took no position.
Comments: In the comments that supported volume regulation, but
with changes from what was included in the proposed rule, the 12
commenters stated the volume regulation was a way to reduce supply and
benefit the industry. These 12 comments also specifically supported the
handler's flexibility to divert excess fruit, stating it would help
handlers maximize the value of the fruit.
The 12 comments also suggested handlers be allowed to divert 100
percent of their excess fruit in processed form, rather than the 50
percent allowed under the proposed rule. They stated
[[Page 46074]]
that with a significant amount of the current inventory in the form of
juice concentrate, this would help prevent additional build-up of
inventory.
Response: While a significant portion of existing inventory is
concentrate, not all handlers produce concentrate or concentrate as a
byproduct of SDC production. Allowing the use of 50 percent of 2018-19
cranberry products to meet the excess fruit restriction recognizes the
need to reduce cranberry concentrate inventory, while also addressing
the overall oversupply facing the industry.
Comments: Eleven of these commenters also expressed that the
exemption for small handlers does not help small growers. These
commenters asked USDA to reconsider its decision to do away with the
2,500 barrel exemption for each grower as recommended by the Committee.
Response: In reviewing the Committee's recommendation and other
available industry information, USDA has determined that existing
inventories in excess of 9 million barrels are putting the most
downward pressure on returns to both growers and handlers.
Consequently, this rule puts more focus on reducing the volume in
inventory, which should benefit both small growers and small handlers.
Rather than provide an exemption of 2,500 barrels for each grower,
an action which would have exempted nearly 2.75 million barrels, this
action exempts small handlers who processed less than 125,000 barrels
during the 2017-18 fiscal year from the allotment requirement. Small
handlers processing less than 125,000 barrels make up nearly 88 percent
of all handlers, yet combined, account for less than 10 percent of the
total volume of cranberries processed. Based on Committee data, these
small handlers were holding little or no volume in inventory at the end
of the 2016-17 season. USDA's revisions to the Committee's proposal
therefore exempts these handlers from the allotment requirement.
Although focused on handlers, this change is expected to have a
positive impact on grower returns by reducing overall supply in the
market. Additionally, small growers would have the option of delivering
their fruit to handlers who are not subject to the regulation.
In addition, handlers who did not have carryover inventory at the
end of the 2017-18 fiscal year are also exempt. USDA believes that this
will allow handlers who have matched their production with market
demand to continue to serve their customer base and maintain their
market share. Only those handlers carrying inventory will be subject to
meeting the allotment requirement.
Handlers subject to the allotment percentage should be able to meet
any market shortfalls by utilizing cranberries or cranberry products
available in inventory. The provision allowing handlers to process a
portion of their excess cranberries also helps provide some
flexibility.
Comment: Another comment stated they did not support using 2017
deliveries to determine the 2018 exemptions, and that the no carryover
inventory exemption is flawed.
Response: Regarding using 2017-18 information to determine 2018-19
exemptions, this is a grower's production allotment volume regulation.
As such, it is important for growers to have an idea of what their
allotment will be for the upcoming season. Growers can then use that
information to make determinations regarding their production. By using
the information from 2017-18, USDA provided growers with exemptions
they could use to determine whether their production would be subject
to the allotment, or the potential opportunity to choose to deliver
their production to an exempt handler.
Comments: Of the 11 comments in opposition of the proposed rule,
five support the reinstatement of the 2,500 barrel exemption for each
grower as discussed above. Four stated the proposed change would do
little or nothing to accomplish USDA's stated goal of controlling the
overage of cranberry concentrate.
Response: Concentrate represents a large portion of existing
inventory. However, at the end of the 2016-17 fiscal year, of the
estimated 9.7 million barrels in inventory, approximately 4.2 million
barrels were frozen berries, while approximately 3.7 million barrels
were concentrate. The rule provides for the diversion of processed
product to meet 50 percent of the restriction as a way to reduce the
inventory of concentrate. However, reducing overall supply, including
whole fruit, is also important in addressing the current level of
inventory.
Comments: Six comments stated that the proposed regulation would
negatively impact independent growers and another stated that this
would hurt small growers. Four commenters stated this regulation would
adversely affect midsize handlers.
Response: While these actions could result in some additional costs
to the industry, the allotment percentage established by this rule
applies uniformly to all those regulated, regardless of size. A
grower's allotment is the total volume a handler may purchase from, or
handle on behalf of, that grower during a year of volume regulation.
Each grower's allotment volume is calculated by multiplying the
individual's sales history by the allotment percentage. As the
allotment percentage is applied to each grower's sales history, the
costs, when applicable, are proportionate and should not place an extra
burden on small entities as compared to large entities.
Further, the benefits are expected to outweigh any additional costs
and positively impact all growers and handlers, regardless of size. The
industry has a significant volume in inventory, and this has had a
negative impact on all grower and handler returns. If steps are not
taken to reduce the level of inventory, these downward pressures will
persist. The purpose of establishing the allotment percentage is to
address the oversupply conditions which are negatively impacting
industry returns. Generally, reducing supply levels results in prices
increasing for growers and handlers. Therefore, lowering inventory
levels is expected to result in positive returns for the entire
industry.
Comments: Four comments stated the shortage in the 2017 crop makes
the grower allotment unnecessary and harmful, and the rule will create
an artificial spike in market price for finished goods. Another
commenter questioned regulating cranberries when Canadian production is
not subject to the allotment.
Response: In reviewing the Committee's recommendation and other
available industry information, USDA has determined that existing
inventory is putting the most downward pressure on returns to both
growers and handlers. Even with the shortfall in the 2017 crop and the
handler withhold established for the 2017-18 season, the industry will
enter the 2018-19 season with inventory levels that will continue to
negatively affect industry returns. In addition, existing inventory,
combined with an additional 9 million barrels of anticipated 2017
domestic production, will provide a more than ample domestic supply to
meet sales requirements. Consequently, this regulation should have
little effect on consumer prices. Moreover, while the Order does not
regulate the volume of imports, given the current levels of available
domestic supply, this rule is not expected to lead to an increase in
imported product.
Comment: One comment in opposition to the proposal stated it
[[Page 46075]]
would be implemented too late, as growers have already made their
production decisions. It further stated the rule should be implemented
next season when they have more time to make economic decisions
relating to their crop.
Response: Utilizing a production allotment allows growers to make
adjustments to reduce their costs. Given the oversupply, it is
important to take action on this issue. Further, growers have been
aware of this recommendation for some time, and the proposed rule on
this action published on April 27, 2018.
Comment: Another commenter stated the proposed regulation
originated from the major cooperative.
Response: As stated above, the proposal for production allotment
was discussed and ultimately recommended by the Committee for USDA's
consideration at the August 4, 2017 and August 31, 2017 meetings. The
Committee is comprised of growers of cranberries operating within the
production area and a public member, and all meetings are open to
industry and public participation.
Comment: The one comment taking a neutral position on the proposed
action also indicated support for reestablishing the 2,500-barrel
exemption for each grower, as recommended by the Committee, should USDA
decide to go forward with the regulation.
Response: For the reasons given above, the 2,500-barrel exemption
for growers will not be reestablished.
Comments: Additional comments were received that addressed issues
outside the scope of the proposed rule.
For the reasons discussed above, 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 Richard Lower at the
previously mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant matter presented, including the
information and recommendation of 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.
List of Subjects in 7 CFR Part 929
Cranberries, Marketing agreements, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR part 929 is
amended as follows:
PART 929--CRANBERRIES GROWN IN STATES OF MASSACHUSETTS, RHODE
ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA,
OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK
0
1. The authority citation for part 929 continues to read as follows:
Authority: 7 U.S.C. 601-674.
Subpart B--Administrative Requirements
0
2. In Sec. 929.104, revise paragraph (a) introductory text and remove
and reserve paragraph (b).
The revision reads as follows:
Sec. 929.104 Outlets for excess cranberries.
(a) In accordance with Sec. 929.61, excess cranberries may be
diverted only to the following noncommercial or noncompetitive outlets:
* * * * *
0
3. In Sec. 929.105, add paragraph (c) to read as follows:
Sec. 929.105 Reporting.
* * * * *
(c) Beginning with crop year 2018-19, the due date for the grower
report required under Sec. 929.62(a) is changed to March 1.
0
4. Add Sec. 929.159 to read as follows:
Sec. 929.159 Excess cranberries.
(a) Beginning with crop year 2018-19, handlers holding excess
cranberries shall submit to the Committee a written plan outlining
procedures for the systematic disposal of such cranberries as specified
in Sec. 929.59(b) by March 1.
(b) Beginning with crop year 2018-19, all excess cranberries shall
be diverted as specified in Sec. 929.59(c) prior to August 31.
0
6. Add Sec. 929.253 to read as follows:
Sec. 929.253 Marketable quantity and allotment percentage for the
2018-19 crop year.
(a) The marketable quantity for the 2018-19 crop year is set at
7.275 million barrels and the allotment percentage is designated at 75
percent.
(b) Organically grown fruit shall be exempt from the volume
regulation requirements of this section. Small handlers who processed
less than 125,000 barrels during the 2017-18 fiscal year are exempt
from the volume regulation requirements of this section. Any handler
who did not have carryover inventory at the end of the 2017-18 fiscal
year is also exempt from the volume regulation requirements of this
section.
(c) Handlers have the option to process up to 50 percent of the
excess cranberries received over their growers' allotments into
dehydrated cranberries or other processed products. Handlers utilizing
this option shall divert an amount of 2018-19 processed products
equivalent to the volume of excess cranberries processed as provided
for in Sec. 929.107. The remaining volume of excess cranberries must
be diverted as whole fruit.
Dated: September 7, 2018.
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2018-19825 Filed 9-11-18; 8:45 am]
BILLING CODE 3410-02-P