[Federal Register: November 21, 2002 (Volume 67, Number 225)]
[Rules and Regulations]
[Page 70133-70140]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21no02-3]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 905
[Docket No. FV02-905-5 FIR]
Oranges, Grapefruit, Tangerines, and Tangelos Grown in Florida;
Limiting the Volume of Small Red Seedless Grapefruit
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: The Department of Agriculture (USDA) is adopting, as a final
rule, without change, an interim final rule limiting the volume of
small red seedless grapefruit entering the fresh market under the
marketing order covering oranges, grapefruit, tangerines, and tangelos
grown in Florida (order). The Citrus Administrative Committee
(Committee) administers the order locally and recommended this action.
This rule limits the volume of sizes 48 and 56 red seedless grapefruit
shipped during the first 22 weeks of the 2002-03 season by continuing
in effect the weekly percentages established for each of the 22 weeks,
beginning September 16, 2002. This action supplies enough small red
seedless grapefruit, without saturating all markets with these small
sizes. This rule should help stabilize the market and improve grower
returns.
EFFECTIVE DATE: December 23, 2002.
FOR FURTHER INFORMATION CONTACT: William G. Pimental, Southeast
Marketing Field Office, Marketing Order Administration Branch, Fruit
and Vegetable Programs, AMS, USDA, 799 Overlook Drive, Suite A, Winter
Haven, Florida 33884-1671; telephone: (863) 324-3375, Fax: (863) 325-
8793; or George Kelhart, Technical Advisor, Marketing Order
Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237;
telephone: (202) 720-2491, Fax: (202) 720-8938.
Small businesses may request information on complying with this
regulation by contacting Jay Guerber, Marketing Order Administration
Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence
Avenue SW., STOP 0237, Washington, DC 20250-0237; telephone (202) 720-
2491, Fax: (202) 720-8938, or E-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This rule is issued under Marketing
Agreement No. 84 and Marketing Order No. 905, both as amended (7 CFR
part 905),
[[Page 70134]]
regulating the handling of oranges, grapefruit, tangerines, and
tangelos grown in Florida, hereinafter referred to as the ``order.''
The marketing agreement and order are effective under the Agricultural
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674),
hereinafter referred to as the ``Act.''
USDA is issuing this rule in conformance with Executive Order
12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This rule will not preempt any State or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with USDA a petition
stating that the order, any provision of the order, or any obligation
imposed in connection with the order is not in accordance with law and
request a modification of the order or to be exempted therefrom. A
handler is afforded the opportunity for a hearing on the petition.
After the hearing USDA would rule on the petition. The Act provides
that the district court of the United States in any district in which
the handler is an inhabitant, or has his or her principal place of
business, has jurisdiction to review USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
This rule limits the volume of sizes 48 and 56 red seedless
grapefruit shipped during the first 22 weeks of the 2002-03 season by
continuing in effect the weekly percentages established for each of the
22 weeks, beginning September 16, 2002. This action supplies enough
small red seedless grapefruit, without saturating all markets with
these small sizes. This rule should help stabilize the market and
improve grower returns.
Section 905.52 of the order provides authority to limit shipments
of any grade or size, or both, of any variety of Florida citrus. Such
limitations may restrict the shipment of a portion of a specified grade
or size of a variety. Under such a limitation, the quantity of such
grade or size a handler may ship during a particular week is
established as a percentage of the total shipments of such variety
shipped by that handler during a prior period, established by the
Committee and approved by USDA.
Section 905.153 of the regulations provides procedures for limiting
the volume of small red seedless grapefruit entering the fresh market.
The procedures specify that the Committee may recommend that only a
certain percentage of sizes 48 and 56 red seedless grapefruit be made
available for shipment into fresh market channels for any week or weeks
during the regulatory period. The regulation period is 22 weeks long
and begins the third Monday in September. Under such a limitation, the
quantity of sizes 48 and 56 red seedless grapefruit that may be shipped
by a handler during a regulated week is calculated using the
recommended percentage. By taking the recommended weekly percentage
times the average weekly volume of red seedless grapefruit handled by
such handler in the previous five seasons, handlers can calculate the
total volume of sizes 48 and 56 they may ship in a regulated week.
This rule limits the volume of sizes 48 (3 \9/16\ inches minimum
diameter) and 56 (3 \5/16\ inches minimum diameter) red seedless
grapefruit entering the fresh market by continuing in effect the weekly
percentages established for the first 22 weeks of the 2002-03 season.
This rule establishes weekly percentages at 45 percent for weeks 1 and
2 (September 16 through September 29), 35 percent for weeks 3 through
19 (September 30, 2002 through January 26, 2003), and 40 percent for
weeks 20, 21, and 22 (January 27 through February 16). The Committee
recommended this action by a vote of 14 in favor and 2 against at a
meeting on May 22, 2002.
The Committee believes the over shipment of smaller-sized red
seedless grapefruit has a detrimental effect on the market. While there
is a market for small-sized red seedless grapefruit, the availability
of large quantities oversupplies the fresh market with these sizes and
negatively impacts the market for all sizes. These smaller sizes, 48
and 56, normally return the lowest prices when compared to the other
larger sizes. However, when there is too much volume of the smaller
sizes available, the overabundance of small sized fruit pulls the
prices down for all sizes.
For the past four seasons, the volume of small sizes available
throughout the season has been considerably larger than in past
seasons. The smaller sizes have represented a larger portion of the
crop at the beginning of the season and this trend has continued
throughout the season. The fruit has not been sizing well. This means a
greater number of small sizes are available later in the season. The
percentage of total available volume represented by small sizes has
been higher for nearly every month of the season when compared to the
same months in previous seasons. This has exacerbated the problems
stemming from the oversupply of small sizes and increased the number of
weeks of a season impacted.
For the last three seasons, 1999-2000, 2000-01, and 2001-02, the
percentage of the remaining crop represented by small sizes in February
has averaged around 53 percent. This compares to an average of 31
percent for the same month for the seasons 1995-96 through 1997-98. In
fact, the last three seasons have averaged a greater percentage of
smaller sizes across each month, October through February, than over
the three seasons 1995-96 through 1997-98. For the last seven seasons
there has been a movement toward an increased volume of small sizes as
a percentage of the overall crop. This is most dramatically evidenced
by the 72 percent increase in small sizes as a percentage of the
overall crop from February 1996 to February 2001.
The volume of small-sized red seedless grapefruit available in
December, January, and February for the 1999-2000, 2000-01, and 2001-02
seasons were comparable or exceeded the volume available in October,
November, and December for the 1995-96, 1996-97, and 1997-98 seasons.
The following chart shows the volume of sizes 48 and smaller red
seedless grapefruit available for these months as a percentage of the
total crop.
Sizes 48 and Smaller as a Percentage of Total Crop
----------------------------------------------------------------------------------------------------------------
95-96 96-97 97-98 99-00 00-01 01-02
----------------------------------------------------------------------------------------------------------------
October.............................. 43% 62% 73% December................ 58% 56% 64%
November............................. 34% 56% 61% January................. 49% 54% 60%
December............................. 30% 51% 52% February................ 50% 53% 56%
----------------------------------------------------------------------------------------------------------------
[[Page 70135]]
The chart shows the percentage of the crop represented by small
sizes increasing fairly substantially beginning as early as the 1996-97
season. It was following the 1995-96 season that the Committee began
its initial discussions regarding the need to control the volume of
small-sized red seedless grapefruit entering the fresh market.
Percentage of size regulation was first used to control the volume of
small sizes during the first 11 weeks of the 1997-98 season.
The Committee recognized that small sizes were a problem at those
volume levels for the months of October through December for the 1995-
96, 1996-97, and 1997-98 seasons. Having comparable or greater volumes
of small sizes available during the early and midseason also represents
a problem for the industry.
For the 2002-03 season, the Committee believes there will continue
to be a surplus of red seedless grapefruit. The Committee believes for
the 2002-03 season fruit size will continue to follow the trend toward
smaller sizes as seen in the past few years and will have an abundant
number of small-sized fruit. To address the volume of small-sized red
seedless grapefruit available and to prevent the over shipment of small
sizes, the Committee voted to utilize the provisions of Sec. 905.153
and establish percentage of size regulation for each of the 22 weeks of
the regulatory period for the 2002-03 season.
In making its recommendation, the Committee considered the success
of previous percentage of size regulations and their experience from
past seasons. The Committee believes the over shipment of smaller-sized
red seedless grapefruit contributes to poor returns for growers and
lower prices. The Committee has successfully used the provisions of
Sec. 905.153 to address these problems, recommending percentage of
size regulation during the first 11 weeks of the 1997-98, 1998-99,
1999-2000, and 2000-01 seasons, and for the first 22 weeks of the 2001-
02 season. Under percentage of size regulation, prices increased and
movement stabilized when compared to seasons without regulation.
For the three seasons prior to the use of percentage size
regulation, 1994-95, 1995-96, and 1996-97, returns for red seedless
grapefruit had been declining, often not returning the cost of
production. On-tree prices for red seedless grapefruit had fallen
steadily from $6.87 per box (1 3/5 bushel) during the 1991-92 season,
to $3.38 per box during the 1993-94 season, to $1.91 per box during the
1996-97 season.
An economic study done by the University of Florida--Institute of
Food and Agricultural Sciences (UF-IFAS) in May 1997, found that on-
tree prices had fallen from a high near $7.00 per carton in 1991-92 to
around $1.50 per carton for the 1996-97 season. The study projected
that if the industry elected to make no changes, the on-tree price
would remain around $1.50 per carton. The study also indicated that
increasing minimum size restrictions could help raise returns.
The Committee believes percentage of size regulation has been
effective in stabilizing prices, both f.o.b. and on-tree. In the three
seasons prior to the first percentage of size regulation in 1997-98,
prices of red seedless grapefruit fell from a weighted average f.o.b.
price of $7.80 per carton in October to a weighted average f.o.b. price
of $5.50 per carton in December. In the five seasons utilizing
percentage of size regulation, red seedless grapefruit maintained
higher prices throughout the season with a weighted average f.o.b.
price of $8.03 per carton in October, to an average f.o.b. price of
$7.01 per carton in December, and remained at around $6.70 in April.
Average prices for the season have also been higher during seasons with
percentage of size regulation. The average season price for red
seedless grapefruit was $7.00 for the last five years compared to $5.83
for the three prior years.
The University of Florida, Citrus Research and Education Center
published an estimated cost of production per acre for the 2000-2001
season. The cost to produce Florida citrus fruit for the fresh market
was estimated at $882.25 per acre for the SunRidge area, or the
interior of the State, $907.72 per acre for the Gulf production area,
and $974.46 per acre for the Indian River area, or the Atlantic coast
region. Using an average of these estimates, it cost approximately $921
per acre to cultivate citrus for the fresh market in 2000-2001. This
average represents a somewhat lower cost of production than what most
growers of red seedless grapefruit experience because a major share of
production is in the Indian River area.
During the past five seasons, red seedless grapefruit production
has averaged around 409 boxes per acre. Based on the cost of production
above, and the number for the average boxes per acre, growers need to
earn a total on-tree value (fruit going both to the fresh market and to
processing) of approximately $2.25 per box in order to break even. For
the three seasons prior to the use of percentage of size regulation,
the total on-tree value averaged $1.78 per box. Comparatively, for the
seasons with regulation, 1997-98 through 2000-01, the on-tree value
averaged $2.36 per box.
On-tree prices for fresh red seedless grapefruit have also been
higher during seasons with percentage of size regulation than for the
three seasons prior to regulation. The average on-tree price for fresh
red seedless grapefruit was $4.30 for the seasons 1997-98 through 2000-
01 with percentage of size regulation compared to $3.08 for the three
years prior to regulation. Small growers have struggled the last eight
seasons to receive returns near the cost of production. For many, these
higher returns mean the difference between profit and loss.
Another benefit of percentage of size regulation has been in
maintaining higher prices for the larger-sized fruit. At the start of
the season, larger-sized fruit command a premium price. In some cases,
the f.o.b. price is $4 to $10 more a carton than for the smaller sizes.
The last three seasons, the f.o.b. price for a size 27 has averaged
around $13.50 per carton in October. This compares to an average f.o.b.
price of around $5.80 per carton for a size 56 during the same period.
In the three years before the issuance of a percentage size regulation,
the f.o.b. price for large sizes dropped to within $1 or $2 of the
f.o.b. price for small sizes by the middle of the season due to the
oversupply of small sizes.
Percentage of size regulation has helped sustain the price
differential, maintaining higher prices for the larger-sized fruit.
During the three years before regulation, the average differential
between the carton price for a size 27 and a size 56 was $3.47 at the
end of October. However, by mid-December the price for the larger-size
had dropped to within $1.68 of the price for the smaller-size fruit. In
the five years with percentage of size regulation, the average
differential between the carton price for a size 27 and a size 56 was
$5.44 at the end of October, was $3.87 in mid-December, and remained at
$3.49 the first week in April.
The margins between the prices for the various sizes of red
grapefruit have remained fairly constant throughout the seasons covered
under percentage of size regulation. According to the Economic Analysis
and Program Planning Branch (EAPP), USDA, if the domestic market
becomes glutted with too many small-sized grapefruit (48 and 56), these
margins would be negatively impacted and total grower returns would be
reduced.
The goal of this percentage of size rule is to reduce the volume of
the least
[[Page 70136]]
valuable fruit in the market and strengthen grower prices and revenues.
Without this rule, the fresh grapefruit market will become glutted with
small-sized fruit, which will have a negative impact on prices for
larger-sized fruit and grower returns. Absent this rule, the price
margins between sizes (23, 27, 32, 36, 40, 48, and 56) will diminish
and ultimately result in lower grower returns. This rule is intended to
fully supply all markets for small sizes with fresh red seedless
grapefruit size 48 and 56, while avoiding oversupplying these markets
to the detriment of grower revenues.
Shipments during the 22 weeks covered by this regulation account
for nearly 60 percent of the total volume of red seedless grapefruit
shipped to the fresh market. Considering this volume and the very
limited returns from grapefruit for processing, it is important that
returns from the fresh market be maximized during this period. Even a
small increase in price when coupled with the volume shipped represents
a significant increase in the overall return to growers.
The Committee believes percentage of size regulation has also
helped stabilize the volume of small sizes entering the fresh market.
During deliberations in past seasons, the Committee considered how
shipments of small sizes had effected the market. Based on available
statistical information, Committee members concluded that once
shipments of sizes 48 and 56 reached levels above 250,000 cartons per
week, prices declined on those and most other sizes of red seedless
grapefruit. The Committee believed if shipments of small sizes are
maintained at around or below 250,000 cartons a week, prices will
stabilize and demand for larger, more profitable sizes will increase.
The last five seasons during the weeks regulated by a percentage of
size regulation, the weekly shipments of sizes 48 and 56 red seedless
grapefruit remained near or below 250,000 cartons for 90 percent of the
regulated weeks. There has also been a 43 percent reduction in the
volume of small sizes entering the fresh market during the weeks
regulated from the 1995-96 season to the 2000-01 season.
An economic study done by Florida Citrus Mutual (Lakeland, Florida)
in April 1998, also found that weekly percentage regulation was
effective. The study stated that part of the strength in early season
pricing appeared to be due to the use of the weekly percentage rule to
limit the volume of sizes 48 and 56. It said prices were generally
higher across the size spectrum with sizes 48 and 56 having the largest
gains, and larger-sized grapefruit registering modest improvements. The
rule shifted the size distribution toward the higher-priced, larger-
sized grapefruit, which helped raise weekly average f.o.b. prices. It
further stated that sizes 48 and 56 grapefruit accounted for around 27
percent of domestic shipments during the same 11 weeks during the 1996-
97 season. Comparatively, sizes 48 and 56 accounted for only 17 percent
of domestic shipments during the same period in 1997-98, as small sizes
were used to supply export customers with preferences for small-sized
grapefruit.
In addition to the success of previous regulations, there are other
surrounding circumstances that warrant the consideration of the
establishment of percentage of size regulation. The production area was
up until June, suffering through a period of insufficient rainfall. The
area received normal to above normal rainfall during the months of
June, July, August, and September. However, it is unclear how this will
affect the sizing of the crop. In previous seasons, when insufficient
rainfall was followed by normal rainfall, a large volume of small-sized
red seedless grapefruit was produced.
Problems with the European and Asian markets could also impact the
volume of small sizes available. In past seasons, these markets have
shown a strong demand for the smaller-sized red seedless grapefruit.
However, the reduction in shipments to these areas experienced during
the last few years is expected to continue during the current season.
This could result in a greater amount of small sizes for remaining
markets to absorb.
The condition of the market for processed grapefruit is also a
consideration. Approximately 52 percent of red seedless grapefruit on
average is used for processing, with the majority being squeezed for
juice. However, this outlet offers limited returns and currently is not
profitable. Statistics from the Florida Department of Citrus (FDOC)
projected that over 32 weeks worth of red grapefruit juice would remain
in inventory at the start of the season. This is expected to have an
additional negative impact on returns.
For the 2000-2001 season, on-tree returns were negative for
processed red seedless grapefruit. During the last five years, only
1999-2000 produced on-tree returns for processed red seedless
grapefruit that exceeded one dollar per box. When on-tree returns for
processed grapefruit drop below a dollar, there is pressure to shift a
larger volume of the overall crop to the fresh market to benefit from
the higher prices normally paid for fresh fruit. Over the period from
1977 through 2000, the differential between fresh prices and processed
prices has averaged $3.55 per box. Consequently, growers prefer to ship
grapefruit to the fresh market.
A fair percentage of red seedless grapefruit shipped for processing
tend toward the smaller sizes. When returns for processed red
grapefruit are low, an additional volume of small sizes could be
shifted toward the fresh market, further aggravating problems with
excessive volumes of small sizes. Due to current inventories, on-tree
prices for processed red seedless grapefruit for the 2002-03 season
will most likely mirror prices from past seasons and remain below a
dollar. This could force an additional volume of small sizes toward the
fresh market.
Further, red seedless grapefruit production continues to exceed
demand. This has contributed to the low returns and led to economic
abandonment of grapefruit. According to information from the National
Agricultural Statistics Service, the seasons of 1995-96, 1996-97, 1997-
98, and 2000-01 had an average economic abandonment of two million
boxes or more of red seedless grapefruit. Complete data for the 2001-02
season is not yet available. However, it is likely that some economic
abandonment did occur last season. Economic abandonment and prices
falling below the cost production support the use of percentage of size
regulation to control the volume of small sizes. The percentage of size
regulation has an impact and is intended to make the most economically
viable fruit available to the fresh market without oversupplying small-
sized fruit. These considerations further support the need to control
the volume of small sizes during the season to prevent the volume of
small sizes from overwhelming all markets.
The Committee believes the problems associated with an uncontrolled
volume of small sizes entering the market will recur without regulation
and that establishing weekly percentages during the last five seasons
has proven successful. Consequently, the Committee recommended weekly
percentages be established for all 22 weeks of the regulatory period,
beginning at 45 percent for the first two weeks, 35 percent for weeks 3
through 19, and 40 percent for weeks 20, 21, and 22.
The Committee considered the percentages set last year as a basis
for discussing this year's percentages. Committee members believed
relaxing last season's percentages from the most
[[Page 70137]]
restrictive level allowed of 25 percent had worked well, providing some
restriction while affording volume for those markets that prefer small
sizes. Also, while the Committee has in past seasons initially voted to
set weekly percentages at 25 percent, the Committee has never
maintained the percentages at the 25 percent level, but has always
relaxed the percentages closer to the start of the season.
Drawing on this experience, the Committee decided to make its
initial recommendations for each of the 22 weeks at levels higher than
25 percent. The recommended percentages closely approximate the final
percentages recommended last season. The percentages are the same as
last season for weeks 1, 2, 3, 19, 21, and 22, represent a 5 percent
increase for weeks 4 through 10 and weeks 15 through 18 and for week
20, and represent a 5 percent decrease for weeks 11 through 14. All are
within 5 percent of those recommended last season.
More information helpful in determining the appropriate weekly
percentages was available after August. At the time of the May meeting,
grapefruit had just begun to size, giving little indication as to the
distribution of sizes. Only the most preliminary of crop estimates was
available, with the official estimate issued in October. Further, the
first reports on how the crop was sizing were not available until after
September. Consequently, the Committee believed it was best to set
regulation at these levels, and then relax the percentages later in the
season if conditions warrant. The Committee met again on September 10,
2002, and agreed to maintain the percentages as established.
The Committee recognized that they could meet again during the
regulation period, as needed, and use the most current information to
consider adjustments in the weekly percentage rates. This will help the
Committee make the most informed decisions as to whether the
established percentages are appropriate. Any changes to the weekly
percentages set by this rule will require additional rulemaking and the
approval of USDA.
During deliberations in past seasons, Committee members concluded
that once shipments of sizes 48 and 56 reached levels above 250,000
cartons a week, prices declined on those and most other sizes of red
seedless grapefruit. The Committee believed if shipments of small sizes
are maintained at around or below 250,000 cartons a week, prices should
stabilize and demand for larger, more profitable sizes should increase.
The Committee considered the 250,000-carton level when recommending
the weekly percentages. The first two weeks were set high at 45 percent
because it was anticipated that only a limited volume would be shipped.
In the last four seasons, shipments of sizes 48 and 56 have never
exceeded 250,000 cartons during the first two weeks. Setting weekly
percentages at 35 percent for the majority of weeks provides a total
available allotment of around 269,150 cartons (35 percent of the total
industry base of approximately 769,000 cartons) per week. While this is
slightly more than 250,000 cartons, it is unlikely all available
allotment will be used each week, and this allows individual handlers
some additional flexibility. The increase to 40 percent for the last
three weeks is to provide a little more allotment at the end of the
regulated period to provide some transition to the period of no
regulation and to help prevent the dumping of small sizes following the
end of regulation. The Committee believes these percentages provide
some flexibility while holding weekly shipments of sizes 48 and 56
close to the 250,000-carton mark.
The Committee believes the volume of small red seedless grapefruit
available will have a detrimental effect on the market if it is not
controlled. Members believe the problems successfully addressed by
percentage of size regulation the last five seasons will return without
regulation. Consequently, the Committee believes weekly percentage of
size regulation should be established for each of the 22 weeks of the
regulatory period. Therefore, this rule establishes weekly percentages
at 45 percent for the first two weeks, 35 percent for weeks 3 through
19, and at 40 percent for weeks 20 through 22. The Committee plans to
meet as needed during the 22-week period to ensure that the weekly
percentages are at the appropriate levels.
While the recommendation to establish percentage of size regulation
was accepted by a majority of Committee members, some raised concerns
about export markets and the loan and transfer system. These concerns
provided the basis for the two Committee members who opposed the
Committee's recommendation.
One area of concern was the impact this regulation may have on
exports. One member stated that market share was being lost in Europe
to Turkey and Israel. The purpose of this regulation is not to
eliminate the marketing of sizes 48 and 56, but rather to prevent the
over shipment of such sizes from saturating all markets.
In making its recommendations, the Committee recognized that
markets exist for small sizes. That is why they recommended limiting
the volume of small sizes instead of eliminating them. The Committee
considered the markets available for small sizes and set a weekly
percentage sufficient to address these markets. The weekly percentages
are set to allow handlers enough volume of small sizes to meet the
markets that prefer them, such as the export market, while preventing
an oversupply that effects other markets. Also, there are provisions to
handle potential allotment shortfalls an individual handler might have.
These include loans and transfers, or using the allowances for over
shipment.
In terms of exports of red seedless grapefruit, volume the last two
seasons has averaged around 13,832,750 cartons according to the Florida
Department of Agriculture (FDOA). Based on information available on
sizes exported, the last two seasons sizes 48 and 56 have averaged 42
percent of the exports of red seedless grapefruit (FDOA). On average,
53 percent of exports occur after the end of the 22 week regulated
period. Industry members have stated that the largest markets for small
sizes do not usually start until late January or in February. This
would skew the volume of small sizes exported toward the latter part of
the season where there are no limitations on small sizes. Consequently,
that would mean a greater percent of small sizes are shipped after
regulation. Therefore, using the 42 percent figure to calculate the
volume of small sizes shipped during the first 22 weeks is probably
close or exceeds the actual percentage represented by small sizes for
those weeks.
For the 22 weeks of regulation, when total weekly exports were
multiplied by 42 percent to estimate the volume of small sizes exported
each week, total allotment available during the 22 weeks as established
by the percentages in this rule exceeds the calculated weekly volume of
small sizes exported during each regulation week. In addition, the
higher percentages recommended by the Committee for the last three
weeks of the regulatory period will also help provide additional
allotment as the major export period begins. Thus, the allotment of
small sizes provided under this rule should be sufficient to service
export demand for small sizes, allowing Florida to maintain those
markets.
In regard to foreign competitors taking markets from Florida,
available information indicates that this should not be a significant
problem. The UF-IFAS study determined that foreign
[[Page 70138]]
competition is minimal. It also inferred that even in cases of
tightened standards, foreign competitors are not likely to take market
share from Florida. Information from the Foreign Agricultural Service,
USDA, and the Florida Department of Citrus indicates production and
fresh shipments are of limited quantities in both Israel and Turkey.
Current statistics show their available volume would significantly
limit their ability to consistently impact Florida's market share.
Total production of grapefruit in Israel is less than 18 percent of the
Florida grapefruit crop while Turkey's is less than 8 percent. Turkey
and Israel may have lower transportation costs due to their closer
proximity to Europe.
Another concern was the loans and transfers system. One member
expressed concern about the fairness of the program and the
availability of allotment for loans and transfers. The purpose of loans
and transfers is to promote the movement of allotment between those who
have allotment but no fruit to those with fruit but no allotment. It is
an individual handler's responsibility to try to locate available
allotment when they need it. Last season, there were 451 loans and
transfers representing 645,386 cartons. Nearly all grapefruit handlers
participated in the loan and transfer process last season.
In some weeks, there was more allotment available than in others.
However, the purpose of this regulation is to limit the volume of small
sizes that are entering the fresh market. The allotment available is
calculated using the prior period so that when the Committee considers
establishing percentage of size regulation they have a good idea of the
total allotment made available each week by establishing different
percentages. By allowing loans and transfers, a greater share of the
total allotment available each week can be utilized. This allows the
actual shipments of small sizes to closely approximate the shipments
the Committee believes the market can handle when it recommends weekly
percentages. Without loans and transfers there would be less volume
available and the regulation would be more restrictive.
After considering the concerns expressed, and the available
information, the Committee determined that this rule was needed to
regulate shipments of small-sized red seedless grapefruit.
Under Sec. 905.153, the quantity of sizes 48 and 56 red seedless
grapefruit a handler may ship during a regulated week is calculated
using the set weekly percentage. A handler's allotment of small sizes
is calculated by taking the weekly percentage times the average weekly
volume of red seedless grapefruit handled by such handler in the
previous five seasons. The product is that handler's total allotment of
sizes 48 and 56 red seedless grapefruit for the given week. This
average week is the base for each handler for each of the 22 weeks of
the regulatory period. Handlers can fill their allotment with size 56,
size 48, or a combination of the two sizes such that the total of these
shipments is within the established limits. The Committee staff
performs the specified calculations and provides them to each handler.
The regulatory period began the third Monday in September,
September 16, 2002. Each regulation week begins Monday at 12:00 a.m.
and ends at 11:59 p.m. the following Sunday.
Section 905.153(d) provides the allowances for overshipments,
loans, and transfers of allotment. These tolerances allow handlers the
opportunity to supply their markets while limiting the impact of small
sizes.
The Committee can also act on behalf of handlers wanting to arrange
allotment loans or participate in the transfer of allotment. Repayment
of an allotment loan is at the discretion of the handlers' party to the
loan. The Committee will inform each handler of the quantity of sizes
48 and 56 red seedless grapefruit they can handle during a particular
week, making the necessary adjustments for overshipments and loan
repayments.
Section 8e of the Act requires that whenever grade, size, quality,
or maturity requirements are in effect for certain commodities under a
domestic marketing order, including grapefruit, imports of that
commodity must meet the same or comparable requirements. This rule does
not change the minimum grade and size requirements under the order,
only the percentages of sizes 48 and 56 red grapefruit that may be
handled. Therefore, no change is necessary in the grapefruit import
regulations as a result of this action.
Final Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action on small entities. Accordingly, AMS has
prepared this final regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 75 grapefruit handlers subject to
regulation under the order and approximately 11,000 growers of citrus
in the regulated area. Small agricultural service firms, including
handlers, are defined by the Small Business Administration (SBA) as
those having annual receipts of less than $5,000,000, and small
agricultural producers are defined as those having annual receipts of
less than $750,000 (13 CFR 121.201).
Based on industry and Committee data, the average annual f.o.b.
price for fresh Florida red seedless grapefruit during the 2001-02
season was approximately $7.12 per 4/5 bushel carton, and total fresh
shipments for the 2001-02 season are estimated at 25.6 million cartons
of red grapefruit. Approximately 33 percent of all handlers handled 72
percent of Florida's grapefruit shipments. Using the average f.o.b.
price, at least 66 percent of the grapefruit handlers could be
considered small businesses under SBA's definition. Therefore, the
majority of Florida grapefruit handlers may be classified as small
entities. The majority of Florida grapefruit producers may also be
classified as small entities.
The over shipment of small-sized red seedless grapefruit
contributes to poor returns and lower on-tree values. This rule limits
the volume of sizes 48 and 56 red seedless grapefruit shipped during
the first 22 weeks of the 2002-03 season by continuing in effect the
weekly percentages established for each of the 22 weeks, beginning
September 16, 2002. This rule sets the weekly percentages at 45 percent
for weeks 1 and 2, 35 percent for week 3 through week 19, and at 40
percent for weeks 20, 21, and 22. The quantity of sizes 48 and 56 red
seedless grapefruit that may be shipped by a handler during a
particular week is calculated using the percentages set. This action
supplies enough small red seedless grapefruit, without saturating all
markets with small sizes. This action helps stabilize the market and
improve grower returns. This rule uses the provisions of Sec. 905.153.
Authority for this action is provided in Sec. 905.52 of the order. The
Committee recommended this action on a vote of 14 in favor and 2
opposed at a meeting on May 22, 2002.
The Committee believes there will continue to be an oversupply of
red seedless grapefruit and that the volume of small sizes available
will continue to
[[Page 70139]]
be a problem in the 2002-03 season. The Committee also believes that
fruit size for the 2002-03 season will continue to follow the trend
toward smaller sizes as seen in the past few years and will have an
abundant number of small-sized fruit. Consequently, the Committee voted
to utilize the provisions of Sec. 905.153 and establish percentage
size regulation for each of the 22 weeks of the regulatory period.
While the establishment of volume regulation may necessitate
additional spot picking, which could entail slightly higher harvesting
costs, in most cases this is already a standard industry practice. In
addition, with spot picking, the persons harvesting the fruit are more
selective and pick only the desired sizes and qualities. This reduces
the amount of time and effort needed in sorting fruit, because
undersized fruit is not harvested. This may result in a cost savings
through reduced processing and packing costs. In addition, because this
regulation is only in effect for part of the season, the overall effect
on costs is minimal. Consequently, this rule is not expected to
appreciably increase costs to producers.
If a 25 percent restriction on small sizes had been applied during
the 22-week period for the three seasons prior to the 1997-98 season,
an average of 3.1 percent of overall shipments during that period would
have been constrained by regulation. A large percentage of this volume
most likely could have been replaced by larger sizes for which there
are no volume restrictions. Under regulation, larger sizes have been
substituted for smaller sizes with a nominal effect on overall
shipments.
In addition, handlers can transfer, borrow or loan allotment based
on their needs in a given week. Handlers also have the option of over
shipping their allotment by 10 percent in a week, provided the over
shipment is deducted from the following week's shipments. Approximately
451 loans and transfers were utilized last season. Statistics for 2001-
02 show that, in only 2 weeks of the regulated period was the total
available allotment used. Therefore, with the weekly percentages for
the majority of weeks set slightly higher than for last season, the
overall impact of this regulation on total shipments should be minimal.
The Committee believes establishing percentage of size regulation
during the 2002-03 season will have benefits similar to those realized
under past regulations. Handlers and producers have received higher
returns under percentage of size regulation. In the three seasons prior
to the first percentage of size regulation in 1997-98, prices of red
seedless grapefruit fell from a weighted average f.o.b. price of $7.80
per carton in October to a weighted average f.o.b. price of $5.50 per
carton in December. In the five seasons utilizing percentage of size
regulation, red seedless grapefruit maintained higher prices throughout
the season with a weighted average f.o.b. price of $8.03 per carton in
October, to an average f.o.b. price of $7.01 per carton in December,
and remained at around $6.70 in April. Average prices for the season
have also been higher during seasons with percentage of size
regulation. The average season price for red seedless grapefruit was
$7.00 for the last five years compared to $5.83 for the three prior
years.
On-tree earnings per box for fresh red seedless grapefruit have
also improved under regulation, providing better returns to growers.
The average on-tree price for fresh red seedless grapefruit was $4.30
for the seasons 1997-98 through 2000-01 with percentage of size
regulation, compared to $3.08 for the three years prior to regulation.
Small growers have struggled the last eight seasons to receive returns
near the cost of production. For many, the higher returns mean the
difference between profit and loss.
Shipments during the 22 weeks covered by this regulation account
for nearly 60 percent of the total volume of red seedless grapefruit
shipped to the fresh market. Considering this volume and the very
limited returns from grapefruit for processing, it is imperative that
returns from the fresh market be maximized during this period. Even a
small increase in price when coupled with the volume shipped represents
a significant increase in the overall return to growers.
Even if this action was only successful in raising returns by $.10
per carton, this increase in combination with the substantial number of
shipments generally made during this 22-week period, would represent an
increased return of nearly $1.4 million. Consequently, any increased
returns generated by this action should more than offset any additional
costs associated with this regulation.
The purpose of this rule is to help stabilize the market and
improve grower returns. Percentage of size regulation is intended to
reduce the volume of the least valuable fruit in the market, and shift
it to those markets that prefer small sizes. This regulation helps the
industry address marketing problems by keeping small sizes (sizes 48
and 56) more in balance with market demand without glutting the fresh
market with these sizes.
This rule provides a supply of small-sized red seedless grapefruit
sufficient to meet market demand, without saturating all markets with
these small sizes. This action is not expected to decrease the overall
consumption of red seedless grapefruit. With supply in excess of
demand, this rule is not expected to impact consumer prices or demand.
The benefits of this rule are expected to be available to all red
seedless grapefruit growers and handlers regardless of their size of
operation. This rule will likely help small under-capitalized growers
who need additional weekly revenues to meet operating costs.
The Committee considered several alternatives to taking this
action. One alternative was to establish the weekly percentages at 25
percent for all weeks and adjust the percentages later in the season as
was done in previous seasons. This alternative was rejected as the
Committee drew on past experiences and sought to provide handlers with
specific shipping percentages earlier in the season to allow them
greater flexibility in formulating marketing plans in a timely manner.
Another alternative discussed was to provide each handler with the
equivalent of one extra week of allotment to use any time during the
season and to eliminate loans and transfers. This would have allowed a
handler to over-ship any quantity of small sizes up to his extra
allotment in one week or divided up through the season. The Committee
believed that if prices were at a premium, most handlers would take
advantage of these higher prices and ship well over what the market
channels could absorb. This alternative was also rejected.
Other alternatives considered centered around setting the weekly
percentages at levels different than those recommended. After
discussion, the Committee agreed on the percentages established in the
rule. Members thought it was best to set regulation at these levels,
and then relax the percentages later in the season if conditions
warrant. The Committee recognized that they could meet again during the
regulation period, as needed, and use the most current information to
consider adjustments in the weekly percentage rates. Therefore, these
alternative percentages were also rejected.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35), the information collection requirements contained in this
rule have been previously approved by the Office
[[Page 70140]]
of Management and Budget (OMB) and assigned OMB No. 0581-0189. As with
all Federal marketing order programs, reports and forms are
periodically reviewed to reduce information requirements and
duplication by industry and public sectors.
USDA has not identified any relevant Federal rules that duplicate,
overlap or conflict with this rule. However, red seedless grapefruit
must meet the requirements as specified in the U.S. Standards for
Grades of Florida Grapefruit (7 CFR 51.760 through 51.784) issued under
the Agricultural Marketing Act of 1946 (7 U.S.C. 1621 through 1627).
The Committee's meeting was widely publicized throughout the citrus
industry and all interested persons were invited to attend the meeting
and participate in Committee deliberations on all issues. Like all
Committee meetings, the May 22, 2002, meeting was a public meeting and
all entities, both large and small, were able to express views on this
issue.
An interim final rule concerning this action was published in the
Federal Register on September 10, 2002. Copies of the rule were mailed
by the Committee's staff to all Committee members and grapefruit
handlers. In addition, the rule was made available through the Internet
by the Office of the Federal Register and USDA. That rule provided for
a 30-day comment period, which ended October 10, 2002. No comments were
received.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http:/
/www.ams.usda.gov/fv/moab.html. Any questions about the compliance
guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
After consideration of all relevant material presented, including
the Committee's recommendation, and other information, it is found that
finalizing the interim final rule, without change, as published in the
Federal Register (67 FR 57319, September 10, 2002) will tend to
effectuate the declared policy of the Act.
List of Subjects in 7 CFR Part 905
Grapefruit, Marketing agreements, Oranges, Reporting and
recordkeeping requirements, Tangelos, Tangerines.
PART 905--ORANGES, GRAPEFRUIT, TANGERINES, AND TANGELOS GROWN IN
FLORIDA
Accordingly, the interim final rule amending 7 CFR part 905 which
was published at 67 FR 57319, September 10, 2002, is adopted as a final
rule without change.
Dated: November 13, 2002.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 02-29533 Filed 11-20-02; 8:45 am]
BILLING CODE 3410-02-P