[Federal Register Volume 86, Number 72 (Friday, April 16, 2021)]
[Proposed Rules]
[Pages 20038-20044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07829]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-SC-20-0087; SC21-985-1 PR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2021-2022 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule invites comments on a recommendation from 
the Far West Spearmint Oil Administrative Committee (Committee) to 
establish salable quantities and allotment percentages for Class 1 
(Scotch) and Class 3 (Native) spearmint oil produced in Washington, 
Idaho, Oregon, and designated parts of Nevada and Utah (the Far West) 
for the 2021-2022 marketing year.

DATES: Comments must be received by June 15, 2021.

ADDRESSES: Interested persons are invited to submit written comments 
concerning this proposed rule. Comments must be sent to the Docket 
Clerk, Marketing Order and Agreement Division, Specialty Crops Program, 
AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC 
20250-0237; or internet: https://www.regulations.gov. Comments should 
reference the document number and the date and page number of this 
issue of the Federal Register and will be made available for public 
inspection in the Office of the Docket Clerk during regular business 
hours or can be viewed at: https://www.regulations.gov. All comments 
submitted in response to this proposal will be included in the record 
and will be made available to the public. Please be advised that the 
identity of the individuals or entities submitting the comments will be 
made public on the internet at the address provided above.

FOR FURTHER INFORMATION CONTACT: Joshua R. Wilde, Marketing Specialist, 
or Gary Olson, Regional Director, Northwest Marketing Field Office, 
Marketing Order and Agreement Division, Specialty Crops Program, AMS, 
USDA; Telephone: (503) 326-2724, 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, or 
email: [email protected].

SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553, 
proposes an amendment to regulations issued to carry out a marketing 
order as defined in 7 CFR 900.2(j). This proposed rule is issued under 
Marketing Order No. 985, as amended (7 CFR part 985), regulating the 
handling of spearmint oil produced in the Far West. Part 985 (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 Committee locally administers the Order 
and is comprised of spearmint oil producers operating within the area 
of production, and a public member.
    The Department of Agriculture (USDA) is issuing this proposed 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.
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This rule is not intended to have retroactive 
effect. Under the Order now in effect, salable quantities and allotment 
percentages may be established for classes of spearmint oil produced in 
the Far West. This proposed rule would establish quantities and 
allotment percentages for Scotch and Native spearmint oil for the 2021-
2022 marketing year, which begins on June 1, 2021.
    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 a marketing order may file with USDA a 
petition stating that the marketing order, any provision of the 
marketing order, or any obligation imposed in connection with the 
marketing order is not in accordance with law and request a 
modification of the marketing order or to be exempted therefrom. Such 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 (U.S.) 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

[[Page 20039]]

not later than 20 days after the date of the entry of the ruling.
    Pursuant to Sec. Sec.  985.50, 985.51, and 985.52, the Order 
requires the Committee to meet each year to consider supply and demand 
of spearmint oil and to adopt a marketing policy for the ensuing 
marketing year. When such considerations indicate a need to establish 
or to maintain stable market conditions through volume regulation, the 
Committee recommends salable quantity limitations and producer 
allotments to regulate the quantity of Far West spearmint oil available 
to the market.
    According to Sec.  985.12, ``salable quantity'' is the total 
quantity of each class of oil (Scotch or Native) that handlers may 
purchase from, or handle on behalf of, producers during a given 
marketing year. The total industry allotment base is the aggregate of 
all allotment bases held individually by producers as prescribed under 
Sec.  985.53(d)(1). The total allotment base is revised each year on 
June 1 to account for producer base being lost as a result of the 
``bona fide effort'' production provision of Sec.  985.53(e) and 
additional base made available pursuant to the provisions of Sec.  
985.153.
    Each producer's prorated share of the salable quantity of each 
class of oil, or their ``annual allotment'' as defined in Sec.  985.13, 
is calculated by using an allotment percentage. The allotment 
percentage is derived by dividing the salable quantity of each class of 
spearmint oil by the total industry allotment base for that same class 
of oil.
    The Committee met on October 14, 2020, to consider its marketing 
policy for the 2021-2022 marketing year. At that meeting, the Committee 
determined that, based on the current market and supply conditions, 
volume regulation for both classes of oil would be necessary. With a 6-
1 vote, the Committee recommended a salable quantity and allotment 
percentage for Scotch spearmint oil of 846,684 pounds and 38 percent. 
The member voting in opposition to the recommendation favored volume 
regulation but supported an unspecified lower salable quantity and 
allotment percent than what was recommended. The Committee voted six in 
favor, with one abstention, to recommend a salable quantity and 
allotment percentage for Native spearmint oil of 938,397 pounds and 37 
percent. The member abstaining did not give a reason.
    This proposed action would establish the amount of Scotch and 
Native spearmint oil that handlers may purchase from, or handle on 
behalf of, producers during the 2021-2022 marketing year, which begins 
on June 1, 2021. Salable quantities and allotment percentages have been 
placed into effect each season since the Order's inception in 1980.

Scotch Spearmint Oil

    The Committee recommended a Scotch spearmint oil salable quantity 
of 846,684 pounds and an allotment percentage of 38 percent for the 
2021-2022 marketing year. The proposed 2021-2022 marketing year salable 
quantity of 846,684 pounds is 8,355 pounds more than the 2020-2021 
marketing year salable quantity of 838,329 pounds. The allotment 
percentage, recommended at 38 percent for the 2021-2022 marketing year, 
is the same as the percentage in effect the previous year. The total 
allotment base for the coming marketing year is estimated to be 
2,228,116 pounds. This figure represents a one-percent increase over 
the 2020-2021 marketing year total allotment base of 2,206,055 pounds. 
The salable quantity (846,684 pounds) is the product of total allotment 
base (2,228,116 pounds) times the allotment percentage (38 percent).
    The Committee considered several factors in making its 
recommendation, including the current and projected future supply, 
estimated future demand, production costs, and producer prices. The 
Committee's recommendation also accounts for the established acreage of 
Scotch spearmint, consumer demand, existing carry-in, reserve pool 
volume, and increased production in competing markets.
    According to the Committee, as costs of production have increased 
and spearmint oil prices have decreased, many producers have forgone 
new plantings of Scotch spearmint. This has resulted in a significant 
decline in production of Scotch spearmint oil in recent years. 
Production has decreased from 1,113,346 pounds produced in 2016 to an 
estimated 498,322 pounds of Scotch spearmint oil produced in 2020.
    Industry reports indicate that trade demand for Far West Scotch 
spearmint oil has decreased over the past five years as international 
markets for spearmint-flavored products have slowed. Sales of Far West 
Scotch spearmint oil have averaged 740,216 pounds per year over the 
last five years but have averaged only 645,965 pounds over the last 
three years. In addition to declining spearmint oil demand, increasing 
production of Scotch spearmint oil in competing markets, most notably 
by Canadian producers, has put additional downward pressure on the Far 
West Scotch spearmint oil market.
    Given the general decline in demand and anticipated market 
conditions for the coming year, the Committee estimates that Scotch 
spearmint oil trade demand for the 2021-2022 marketing year trade will 
be 623,000 pounds, which is 19,000 pounds higher than the 2020-2021 
estimate, but still down from the three-year average of actual sales. 
Should the proposed volume regulation levels prove insufficient to 
adequately supply the market, the Committee has the authority to 
recommend intra-seasonal increases, as it has in previous marketing 
years.
    The Committee calculated the minimum salable quantity of Scotch 
spearmint oil that would be required during the 2021-2022 marketing 
year (359,424 pounds) by subtracting the estimated salable carry-in 
(263,576 pounds) on June 1, 2021, from the estimated trade demand 
(623,000 pounds). This minimum salable quantity represents the 
estimated minimum amount of Scotch spearmint oil that would be needed 
to satisfy estimated trade demand for the coming year. To ensure that 
the market would be fully supplied, the Committee recommended a 2021-
2022 marketing year salable quantity of 846,684 pounds. The recommended 
salable quantity, combined with an estimated 263,576 pounds of salable 
quantity carried in from the previous year, would yield a total 
available supply of 1,110,260 pounds of Scotch spearmint oil for the 
2021-2022 marketing year. With the recommended salable quantity and 
current market environment, the Committee estimates that as much as 
487,260 pounds of salable Scotch spearmint oil could be carried into 
the 2022-2023 marketing year.
    Salable carry-in is the primary measure of excess spearmint oil 
supply under the Order, as it represents overproduction in prior years 
that is currently available to the market without restriction. Under 
volume regulation, spearmint oil that is designated as salable 
continues to be available to the market until it is sold and may be 
marketed at any time at the discretion of the owner. Salable quantities 
established under volume regulation over the last four seasons have 
exceeded sales, leading to a gradual build of Scotch spearmint oil 
salable carry-in.
    The Committee estimates that there will be 263,576 pounds of 
salable carry-in of Scotch spearmint oil on June 1, 2021. If current 
market conditions are maintained and the Committee's projections are 
correct, salable carry-in would increase to 487,260 pounds at the 
beginning of the 2022-2023 marketing

[[Page 20040]]

year. This level would be above the quantity that the Committee 
generally considers favorable (150,000 pounds). However, the Committee 
believes that, given the current economic conditions in the Scotch 
spearmint oil industry, some Scotch spearmint oil producers may not 
produce enough oil in the 2021-2022 marketing year to fill all of their 
annual allotment. The Committee estimates that as much as 245,352 
pounds of 2020-2021 marketing year annual allotment may not be filled 
by producers. While the Committee has not projected unused base 
allotment for the 2021-2022 marketing year and did not incorporate this 
factor in its recommendation, it anticipates that the actual quantity 
of Scotch spearmint oil carried into the following marketing year will 
be significantly less than the quantity calculated above (487,260 
pounds).
    Spearmint oil held in reserve is oil that has been produced in 
excess of a producer's marketing year allotment and is not available to 
the market in the current marketing year without an increase in the 
salable quantity and allotment percentage. Oil held in the reserve pool 
is another indicator of excess supply. Scotch spearmint oil held in the 
reserve pool was 67,645 pounds as of May 31, 2020, down from 132,984 
pounds as of May 31, 2019. However, the Scotch spearmint oil reserve is 
expected to rebound slightly to an estimated 83,608 pounds by the end 
of the 2020-2021 marketing year. This quantity of reserve pool oil 
should be an adequate buffer to supply the market, if necessary, should 
the industry experience an unexpected increase in demand.
    The Committee recommended an allotment percentage of 38 percent for 
the 2021-2022 marketing year for Scotch spearmint oil. During its 
October 14, 2020, meeting, the Committee calculated an initial 
allotment percentage by dividing the minimum required salable quantity 
(359,424 pounds) by the total estimated allotment base (2,228,116 
pounds), resulting in 16.1 percent. However, producers and handlers at 
the meeting indicated that the computed percentage (16.1 percent) might 
not adequately supply potential 2021-2022 Scotch spearmint oil market 
demand and may also result in a less than desirable carry-in for the 
subsequent marketing year. After deliberation, the Committee increased 
the recommended allotment percentage to 38 percent. The total estimated 
allotment base (2,228,116 pounds) for the 2021-2022 marketing year, 
multiplied by the recommended salable allotment percentage (38 
percent), yields 846,684 pounds, which is the recommended salable 
quantity for the 2021-2022 marketing year.
    The 2021-2022 marketing year computational data for the Committee's 
recommendations is detailed below.
    (A) Estimated carry-in of Scotch spearmint oil on June 1, 2021: 
263,576 pounds. This figure is the difference between the 2020-2021 
marketing year total available supply of 867,576 pounds and the 2020-
2021 marketing year estimated trade demand of 604,000 pounds. The 
estimated 2020-2021 marketing year trade demand was revised down from 
the original estimate of 750,000 pounds by the Committee at its October 
14, 2020, meeting.
    (B) Estimated trade demand of Scotch spearmint oil for the 2021-
2022 marketing year: 623,000 pounds. This figure was established at the 
Committee meeting held on October 14, 2020.
    (C) Salable quantity of Scotch spearmint oil required from the 
2021-2022 marketing year production: 359,424 pounds. This figure is the 
difference between the estimated 2021-2022 marketing year trade demand 
(623,000 pounds) and the estimated carry-in on June 1, 2021 (263,576 
pounds). This salable quantity represents the minimum amount of Scotch 
spearmint oil that would be needed to satisfy estimated demand for the 
coming year.
    (D) Total estimated Scotch spearmint oil allotment base of for the 
2021-2022 marketing year: 2,228,116 pounds. This figure represents a 
one-percent increase over the 2020-2021 total actual allotment base of 
2,206,055 pounds, as prescribed by Sec.  985.53. The one-percent 
increase equals 22,061 pounds. This total estimated allotment base is 
revised each year on June 1 in accordance with Sec.  985.53(e).
    (E) Computed Scotch spearmint oil allotment percentage for the 
2021-2022 marketing year: 16.1 percent. This percentage is computed by 
dividing the minimum required salable quantity (359,424 pounds) by the 
total estimated allotment base (2,228,116 pounds).
    (F) Recommended Scotch spearmint oil allotment percentage for the 
2021-2022 marketing year: 38 percent. This is the Committee's 
recommendation and is based on the computed allotment percentage (16.1 
percent) and input from producers and handlers at the October 14, 2020, 
meeting. The recommended 38 percent allotment percentage reflects the 
Committee's belief that the computed percentage (16.1 percent) may not 
adequately supply the anticipated 2021-2022 marketing year Scotch 
spearmint oil market demand.
    (G) Recommended Scotch spearmint oil salable quantity for the 2021-
2022 marketing year: 846,684 pounds. This figure is the product of the 
recommended salable allotment percentage (38 percent) and the total 
estimated allotment base (2,228,116 pounds) for the 2021-2022 marketing 
year.
    (H) Estimated total available supply of Scotch spearmint oil for 
the 2021-2022 marketing year: 1,110,260 pounds. This figure is the sum 
of the 2021-2022 marketing year recommended salable quantity (846,684 
pounds) and the estimated carry-in on June 1, 2021 (263,576 pounds).
    For the reasons stated above, the Committee believes that the 
recommended salable quantity and allotment percentage would adequately 
satisfy trade demand, would result in a reasonable carry-in for the 
following year, and would contribute to the orderly marketing of Scotch 
spearmint oil.

Native Spearmint Oil

    The Committee recommended a Native spearmint oil salable quantity 
of 938,397 pounds and an allotment percentage of 37 percent for the 
2021-2022 marketing year. These figures are, respectively, 292,089 
pounds and 12 percentage points lower than the levels established for 
the 2020-2021 marketing year.
    The Committee utilized handlers' estimated trade demand of Native 
spearmint oil for the coming year, historical and current Native 
spearmint oil production, inventory statistics, and international 
market data obtained from consultants for the spearmint oil industry to 
arrive at these recommendations.
    The Committee anticipates that 2021 Native spearmint oil production 
will total 1,181,230 pounds, down substantially from the previous 
year's production of 1,493,686 pounds. Committee records show an 
estimated 7,957 acres of Native spearmint production in the Far West in 
2020 compared to an estimated 9,013 acres of Native spearmint 
production in 2019.
    Sales of Native spearmint oil have also been declining, falling 
from a high of 1,565,515 pounds in the 2017-2018 marketing year to 
1,076,906 pounds over the 2019-2020 marketing year, the last full year 
of reported sales. The Committee estimates that trade demand for Native 
spearmint oil will be 1,059,167 pounds for the 2020-2021 marketing 
year, well below the 5-year sales average of 1,283,266 pounds.
    The Committee expects that 694,137 pounds of salable Native 
spearmint oil

[[Page 20041]]

from prior years will be carried into the 2021-2022 marketing year. 
This amount is up from the 522,818 pounds of salable oil carried into 
the 2020-2021 marketing year and well above the level that the 
Committee generally considers favorable.
    Further, the Committee estimated that there will be 1,130,264 
pounds of Native spearmint oil in the reserve pool at the beginning of 
the 2021-2022 marketing year. This figure is 49,256 pounds lower than 
the quantity of reserve pool oil held by producers on June 1, 2020, but 
is still higher than the level that the Committee believes is optimal. 
This modest decline in the reserve oil reverses the recent trend of 
gradual increases that the industry has experienced over the past 
several marketing years.
    The Committee expects end users of Native spearmint oil to continue 
to rely on Far West production as their primary source of high-quality 
Native spearmint oil. Overseas production of Native spearmint has 
declined in recent years. As a result, U.S. exports of Native spearmint 
oil have been increasing since 2018. However, the increase in domestic 
production from other states outside the Far West region has more than 
offset the decline in foreign production of Native spearmint oil. For 
instance, production of Native spearmint oil in the U.S. Midwest region 
has spiked in recent years, rising from fewer than 2,000 acres in 2016 
to approximately 5,500 acres in 2020. Additionally, the sharp increase 
in demand for Native spearmint experienced during the 2017-2018 
marketing year has tapered off in recent years. These factors have 
contributed to declining trade demand for Far West Native spearmint oil 
and led to downward pressure on producer prices.
    The Committee chose to be cautiously optimistic in the 
establishment of its trade demand estimate for the 2021-2022 marketing 
year to ensure that the market would be adequately supplied. At the 
October 14, 2020, meeting, the Committee estimated the 2021-2022 
marketing year Native spearmint oil trade demand to be 1,125,000 
pounds. This figure is based on input provided by producers at nine 
production area meetings held in early October 2020, as well as 
estimates provided by handlers and other meeting participants. This 
figure represents an increase of 65,833 pounds from the previous year's 
revised trade demand estimate. The average estimated trade demand for 
Native spearmint oil derived from the area producer meetings was 
1,105,556 pounds, whereas the handlers' estimates ranged from 900,000 
to 1,300,000 pounds. The average of Native spearmint oil sales over the 
last three years was 1,295,832 pounds. The quantity marketed over the 
most recent full marketing year, 2019-2020, was 1,076,906 pounds.
    The estimated June 1, 2021, carry-in of 694,137 pounds of Native 
spearmint oil, plus the recommended 2021-2022 marketing year salable 
quantity of 938,397 pounds, would result in an estimated total 
available supply of 1,632,534 pounds of Native spearmint oil during the 
2021-2022 marketing year. With the corresponding estimated trade demand 
of 1,125,000 pounds, the Committee projects that 507,534 pounds of oil 
will be carried into the 2022-2023 marketing year. This would result in 
a year-over-year decrease of 186,603 pounds. The Committee estimates 
that there will be 1,130,264 pounds of Native spearmint oil held in the 
reserve pool at the beginning of the 2021-2022 marketing year. Should 
the industry experience an unexpected increase in trade demand, oil in 
the Native spearmint oil reserve pool could be released through an 
intra-seasonal increase to satisfy that demand.
    The Committee recommended a producer allotment percentage of 37 
percent for the 2021-2022 marketing year. During its October 14, 2020, 
meeting, the Committee calculated an initial producer allotment 
percentage of 17 percent by dividing the minimum required salable 
quantity to satisfy estimated trade demand (430,863 pounds) by the 
total allotment base (2,536,208 pounds). However, producers and 
handlers at the meeting expressed that the computed percentage of 17 
percent may not adequately supply the potential 2021-2022 Native 
spearmint oil market demand or result in adequate carry-in for the 
subsequent marketing year. After deliberation, the Committee increased 
the recommended allotment percentage to 37 percent. The total estimated 
allotment base (2,536,208 pounds) for the 2021-2022 marketing year 
multiplied by the recommended salable allotment percentage (37 percent) 
yields 938,397 pounds, the recommended salable quantity for the year.
    The 2021-2022 marketing year computational data for the Committee's 
recommendations is further outlined below.
    (A) Estimated carry-in of Native spearmint oil on June 1, 2021: 
694,137 pounds. This figure is the difference between the revised 2020-
2021 marketing year total available supply of 1,753,304 pounds and the 
revised 2020-2021 marketing year estimated trade demand of 1,059,167 
pounds.
    (B) Estimated trade demand of Native spearmint oil for the 2021-
2022 marketing year: 1,125,000 pounds. This estimate was established by 
the Committee at the October 14, 2020, meeting.
    (C) Salable quantity of Native spearmint oil required from the 
2021-2022 marketing year production: 430,863 pounds. This figure is the 
difference between the estimated 2021-2022 marketing year estimated 
trade demand (1,125,000 pounds) and the estimated carry-in on June 1, 
2021 (694,137 pounds). This is the minimum amount of Native spearmint 
oil that the Committee believes would be required to meet the 
anticipated 2021-2022 marketing year trade demand.
    (D) Total estimated allotment base of Native spearmint oil for the 
2021-2022 marketing year: 2,536,208 pounds. This figure represents a 
one-percent increase over the 2020-2021 total actual allotment base of 
2,511,097 pounds as prescribed in Sec.  985.53. The one-percent 
increase equals 25,111 pounds of oil. This estimate is revised each 
year on June 1, due to adjustments resulting from the bona fide effort 
production provisions of Sec.  985.53(e).
    (E) Computed Native spearmint oil allotment percentage for the 
2021-2022 marketing year: 17.0 percent. This percentage is calculated 
by dividing the required salable quantity (430,863 pounds) by the total 
estimated allotment base (2,536,208 pounds) for the 2021-2022 marketing 
year.
    (F) Recommended Native spearmint oil allotment percentage for the 
2021-2022 marketing year: 37 percent. This is the Committee's 
recommendation based on the computed allotment percentage (17.0 
percent) and input from producers and handlers at the October 14, 2020, 
meeting. The recommended 37 percent allotment percentage is based on 
the Committee's belief that the computed percentage (17.0 percent) may 
not adequately supply the potential market for Native spearmint oil in 
the 2021-2022 marketing year or allow for salable Native spearmint oil 
to be carried into the beginning of the 2022-2023 marketing year.
    (G) Recommended Native spearmint oil 2021-2022 marketing year 
salable quantity: 938,397 pounds. This figure is the product of the 
recommended allotment percentage (37 percent) and the total estimated 
allotment base (2,536,208 pounds).
    (H) Estimated available supply of Native spearmint oil for the 
2021-2022 marketing year: 1,632,534 pounds. This figure is the sum of 
the 2021-2022 recommended salable quantity (938,397 pounds) and the 
estimated carry-in on

[[Page 20042]]

June 1, 2021 (694,137 pounds). This amount could be increased, as 
needed, through an intra-seasonal increase in the salable quantity and 
allotment percentage.
    The Committee's recommended Scotch and Native spearmint oil salable 
quantities and allotment percentages of 846,684 pounds and 38 percent, 
and 938,397 pounds and 37 percent, respectively, would match the 
available supply of each class of spearmint oil to the estimated demand 
of each, thus avoiding extreme fluctuations in inventories and prices. 
This proposed rule is similar to regulations issued in prior seasons.
    The salable quantities in this proposed rule are not expected to 
cause a shortage of either class of spearmint oil. Any unanticipated or 
additional market demand for either class of spearmint oil which may 
develop during the marketing year could be satisfied by an intra-
seasonal increase in the salable quantity and corresponding allotment 
percentage. The Order contains a provision in Sec.  985.51 for intra-
seasonal increases to allow the Committee the flexibility to respond 
quickly to changing market conditions.
    Under volume regulation, producers who produce more than their 
annual allotments during the marketing year may transfer such excess 
spearmint oil to producers who have produced less than their annual 
allotment. In addition, on December 1 of each year, producers who have 
not transferred their excess spearmint oil to other producers must 
place their excess spearmint oil production into the reserve pool, to 
be released in the future, in accordance with market needs and under 
the Committee's direction.
    In conjunction with the issuance of this proposed rule, USDA has 
reviewed the Committee's marketing policy statement for the 2021-2022 
marketing year. The Committee's marketing policy statement, a 
requirement whenever the Committee recommends volume regulation, meets 
the requirements of Sec. Sec.  985.50 and 985.51.
    The establishment of the proposed salable quantities and allotment 
percentages would allow for anticipated market needs. In determining 
anticipated market needs, the Committee considered historical sales, as 
well as changes and trends in production and demand. This proposal 
would also provide producers with information regarding the amount of 
spearmint oil that should be produced for the 2021-2022 season to meet 
anticipated market demand.

Initial Regulatory Flexibility Act

    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 proposed rule on small 
entities. Accordingly, AMS has prepared this initial regulatory 
flexibility analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
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 the 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 40 producers and 94 producers of Scotch and 
Native spearmint oil, respectively, in the regulated production area 
and approximately 8 spearmint oil handlers subject to regulation under 
the Order. Small agricultural service firms are defined by the Small 
Business Administration (SBA) as those having annual receipts of less 
than $30,000,000, and small agricultural producers are defined as those 
having annual receipts of less than $1,000,000 (13 CFR 121.201).
    The Committee reported that recent producer prices for spearmint 
oil have ranged from $12.00 to $17.00 per pound. The National 
Agricultural Statistics Service (NASS) reported that the 2019 U.S. 
season average spearmint oil producer price per pound was $16.90. 
Spearmint oil utilization for the 2019-2020 marketing year, as reported 
by the Committee, was 598,706 pounds and 1,076,906 pounds for Scotch 
and Native spearmint oil, respectively, for a total of 1,675,612 
pounds. Multiplying $16.90 per pound by 2019-2020 marketing year 
spearmint oil utilization of 1,675,612 pounds yields a crop value 
estimate of about $28.3 million.
    Given the accounting requirements for the volume regulation 
provisions of the Order, the Committee maintains accurate records of 
each producer's production and sales. Using the $16.90 average 
spearmint oil price, and Committee production data for each producer, 
the Committee estimates that 37 of the 40 Scotch spearmint oil 
producers and 90 of the 94 Native spearmint oil producers could be 
classified as small entities under the SBA definition.
    There is no third party or governmental entity that collects and 
reports spearmint oil prices received by spearmint oil handlers. 
However, the Committee estimates an average spearmint oil handling 
markup at approximately 20 percent of the price received by producers. 
Multiplying 1.20 by the 2018 producer price of $16.90 yields a handler 
free on board (f.o.b.) price per pound estimate of $20.28.
    Multiplying this estimated handler f.o.b. price by the 2019-2020 
marketing year total spearmint oil utilization of 1,675,612 pounds 
results in an estimated handler-level spearmint oil value of $33.98 
million. Dividing this figure by the number of handlers (8) yields 
estimated average annual handler receipts of about $4.25 million, which 
is well below the SBA threshold for small agricultural service firms.
    Furthermore, using confidential data on pounds handled by each 
handler, and the above mentioned estimated handler price per pound, the 
Committee reported that it is not likely that any of the eight handlers 
had 2019-2020 marketing year spearmint oil sales that exceeded the $30 
million SBA threshold.
    Therefore, in view of the foregoing, the majority of producers of 
spearmint oil may be classified as small entities, and all of the 
handlers of spearmint oil may be classified as small entities.
    This proposed rule would establish the quantity of spearmint oil 
produced in the Far West, by class, which handlers may purchase from, 
or handle on behalf of, producers during the 2021-2022 marketing year. 
The Committee recommended this action to help maintain stability in the 
spearmint oil market by matching supply to estimated demand, thereby 
avoiding extreme fluctuations in supplies and prices. Establishing 
quantities that may be purchased or handled during the marketing year 
through volume regulation allows producers to coordinate their 
spearmint oil production with the expected market demand. Authority for 
this proposal is provided in Sec. Sec.  985.50, 985.51, and 985.52.
    The Committee estimated the total trade demand for the 2021-2022 
marketing year for both classes of oil at 1,748,000 pounds. In 
addition, the Committee expects that the combined salable carry-in for 
both classes of spearmint oil will be 957,713 pounds. As such, the 
combined required salable quantity for the 2021-2022 marketing year is 
estimated to be 790,287 pounds (1,748,000 pounds trade demand less 
957,713 pounds carry-in). Under volume regulation, total sales of 
spearmint oil by producers for the 2021-2022 marketing year would be 
held to 2,742,794 pounds (the recommended salable quantity for both

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classes of spearmint oil of 1,785,081 pounds plus 957,713 pounds of 
carry-in).
    This total available supply of 2,742,794 pounds should be more than 
adequate to supply the 1,748,000 pounds of anticipated total trade 
demand for spearmint oil. In addition, as of May 31, 2020, the total 
reserve pool for both classes of spearmint oil stood at 1,247,165 
pounds. That quantity is expected to remain relatively unchanged over 
the course of the 2021-2022 marketing year, with current Committee 
reserve pool estimates totaling 1,366,673 pounds. Should trade demand 
increase unexpectedly during the 2021-2022 marketing year, reserve pool 
spearmint oil could be released into the market to supply that increase 
in demand.
    The recommended allotment percentages, upon which 2021-2022 
marketing year annual allotments are based, are 38 percent for Scotch 
spearmint oil and 37 percent for Native spearmint oil. Without volume 
regulation, producers would not be held to these allotment levels, and 
could sell unrestricted quantities of spearmint oil.
    The USDA econometric model used to evaluate the Far West spearmint 
oil market estimated that the season average producer price per pound 
(from both classes of spearmint oil) would decline about $1.70 per 
pound without volume regulation. The surplus situation for the 
spearmint oil market that would exist without volume regulation in the 
2021-2022 marketing year also would likely dampen prospects for 
improved producer prices in future years because of the excessive 
buildup in stocks.
    In addition, the econometric model estimated that spearmint oil 
prices would fluctuate with greater amplitude in the absence of volume 
regulation. The coefficient of variation, or CV (a standard measure of 
variability), of Far West spearmint oil producer prices for the period 
1980-2019 (the years in which the Order has been in effect), is 25 
percent, compared to 49 percent for the 20-year period (1960-1979) 
immediately prior to the establishment of the Order. Since higher CV 
values correspond to greater variability, this is an indicator of the 
price stabilizing impact of the Order.
    The use of volume regulation allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume regulation is believed to 
have little or no effect on consumer prices of products containing 
spearmint oil and would not result in fewer retail sales of such 
products.
    The Committee discussed alternatives to the recommendations 
contained in this rule for both classes of spearmint oil. The Committee 
rejected the idea of not regulating volume for either class of 
spearmint oil because of the severe, price-depressing effects that 
would likely occur without volume regulation. The Committee also 
discussed and considered salable quantities and allotment percentages 
that were above and below the levels that were ultimately recommended 
for both classes of spearmint oil. Ultimately, the action recommended 
by the Committee was to maintain the allotment percentage for Scotch 
spearmint oil (which would slightly increase the salable quantity) and 
to decrease both the salable quantity and allotment percentage for 
Native spearmint oil from the levels established for the 2020-2021 
marketing year.
    As noted earlier, the Committee's recommendation to establish 
salable quantities and allotment percentages for both classes of 
spearmint oil was made after careful consideration of all available 
information including: (1) The estimated quantity of salable oil of 
each class held by producers and handlers; (2) the estimated demand for 
each class of oil; (3) the prospective production of each class of oil; 
(4) the total of allotment bases of each class of oil for the current 
marketing year and the estimated total of allotment bases of each class 
for the ensuing marketing year; (5) the quantity of reserve oil, by 
class, in storage; (6) producer prices of oil, including prices for 
each class of oil; and (7) general market conditions for each class of 
oil, including whether the estimated season average price to producers 
is likely to exceed parity.
    Based on its review, the Committee believes that the salable 
quantities and allotment percentages recommended would achieve the 
objectives sought. The Committee also believes that, should there be no 
volume regulation in effect for the upcoming marketing year, the Far 
West spearmint oil industry would return to the pronounced cyclical 
price patterns that occurred prior to the promulgation of the Order. As 
previously stated, annual salable quantities and allotment percentages 
have been issued for both classes of spearmint oil since the Order's 
inception. The salable quantities and allotment percentages proposed 
herein are expected to facilitate the goal of maintaining orderly 
marketing conditions for Far West spearmint oil for the 2021-2022 and 
future marketing years.
    Costs to producers and handlers, large and small, resulting from 
this proposal are expected to be offset by the benefits derived from a 
more stable market and increased returns. The benefits of this rule are 
expected to be equally available to all producers and handlers 
regardless of their size.
    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. 0581-0178, Vegetable 
and Specialty Crops. No changes are necessary in those requirements as 
a result of this proposed action. Should any changes become necessary, 
they would be submitted to OMB for approval.
    This proposed rule would establish the salable quantities and 
allotment percentages for Scotch spearmint oil and Native spearmint oil 
produced in the Far West during the 2021-2022 marketing year. 
Accordingly, this proposal would not impose any additional reporting or 
recordkeeping requirements on either small or large spearmint oil 
producers 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. In 
addition, USDA has not identified any relevant Federal rules that 
duplicate, overlap, or conflict with this proposed 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.
    The Committee's meeting was widely publicized throughout the 
spearmint oil industry, and all interested persons were invited to 
attend the meeting and participate in Committee deliberations on all 
issues. Like all Committee meetings, the October 14, 2020, meeting was 
a public meeting and all entities, both large and small, were able to 
express views on this issue. Interested persons are invited to submit 
comments on this proposed rule, including the regulatory and 
informational impacts of this action on small businesses.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: 
https://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.

[[Page 20044]]

    A 60-day comment period is provided to allow interested persons to 
respond to this proposal. All written comments timely received will be 
considered before a final determination is made on this matter.

List of Subjects in 7 CFR Part 985

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

    For the reasons set forth in the preamble, the Agriculture 
Marketing Services proposes to amend 7 CFR part 985 as follows:

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

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

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

0
2. Section 985.236 is added to read as follows:


Sec.  985.236  Salable quantities and allotment percentages--2021-2022 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2021, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 846,684 pounds and 
an allotment percentage of 38 percent.
    (b) Class 3 (Native) oil--a salable quantity of 938,397 pounds and 
an allotment percentage of 37 percent.

Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2021-07829 Filed 4-15-21; 8:45 am]
BILLING CODE P