[Federal Register: March 12, 2003 (Volume 68, Number 48)]
[Proposed Rules]
[Page 11751-11756]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12mr03-12]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 11751]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Docket No. FV-03-985-1 PR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2003-2004 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This rule would establish the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle for, producers during the 2003-2004 marketing year, which begins
on June 1, 2003. This rule invites comments on the establishment of
salable quantities and allotment percentages for Class 1 (Scotch)
spearmint oil of 857,444 pounds and 45 percent, respectively, and for
Class 3 (Native) spearmint oil of 808,528 pounds and 38 percent,
respectively. The Spearmint Oil Administrative Committee (Committee),
the agency responsible for local administration of the marketing order
for spearmint oil produced in the Far West, recommended this rule for
the purpose of avoiding extreme fluctuations in supplies and prices, to
help maintain stability in the spearmint oil market.
DATES: Comments must be received by April 1, 2003.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposed rule. Comments must be sent to the Docket
Clerk, Marketing Order Administration Branch, Fruit and Vegetable
Programs, AMS, USDA, 1400 Independence Avenue SW., STOP 0237,
Washington, DC 20250-0237; Fax: (202) 720-8938; or E-mail:
moab.docketclerk@usda.gov. All comments should reference the docket
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:
http://www.ams.usda.gov/fv/moab.html.
http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Robert J. Curry, Northwest Marketing
Field Office, Marketing Order Administration Branch, Fruit and
Vegetable Programs, AMS, USDA, 1220 SW Third Avenue, suite 385,
Portland, Oregon 97204; telephone: (503) 326-2724; Fax: (503) 326-7440;
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 proposal is issued under Marketing
Order No. 985 (7 CFR Part 985), as amended, regulating the handling of
spearmint oil produced in the Far West (Washington, Idaho, Oregon, and
designated parts of Nevada and Utah), hereinafter referred to as the
``order.'' This order is effective under the Agricultural Marketing
Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter
referred to as the ``Act.''
The Department of Agriculture (USDA) is issuing this rule in
conformance with Executive Order 12866.
This proposal has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the provisions of 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 the quantity of spearmint oil produced in the Far West,
by class, that may be purchased from or handled for producers by
handlers during the 2003-2004 marketing year, which begins on June 1,
2003. This proposed rule would 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.
Pursuant to authority in Sec. Sec. 985.50, 985.51, and 985.52 of
the order, the Committee, with seven of its eight members present, met
on October 2, 2002, and recommended salable quantities and allotment
percentages for both classes of oil for the 2003-2004 marketing year.
With six members in favor and one opposed, the Committee recommended
the establishment of a salable quantity and allotment percentage for
Scotch spearmint oil of 857,444 pounds and 45 percent, respectively.
For Native spearmint oil, the Committee unanimously recommended the
establishment of a salable quantity and allotment percentage of 808,528
pounds and 38 percent, respectively.
This proposed rule would limit the amount of spearmint oil that
handlers may purchase from, or handle for, producers during the 2003-
2004 marketing year, which begins on June 1, 2003. Salable quantities
and allotment percentages have been placed into effect each season
since the order's inception in 1980.
The U.S. production of spearmint oil is concentrated in the Far
West, primarily Washington, Idaho, and Oregon (part of the area covered
by the marketing order). Spearmint oil is also produced in the Midwest.
The production area covered by the marketing order currently accounts
for approximately 55 percent of the annual U.S. production of Scotch
spearmint oil.
[[Page 11752]]
When the order became effective in 1980, the United States produced
nearly 100 percent of the world's supply of Scotch spearmint oil, of
which approximately 72 percent was produced in the regulated production
area in the Far West. The Far West continued to produce an average of
about 69 percent of the world's Scotch spearmint oil supply during the
period from 1980 to 1990. International production characteristics have
changed since 1990, however, with foreign Scotch spearmint oil
production contributing significantly to world production. The Far
West's market share as a percent of total world sales has averaged
about 45 percent since 1990.
Between 1996 and 2000, the Committee's marketing strategy for
Scotch spearmint oil centered around an attempt to regain a substantial
amount of the Far West's historical share of the global market for this
class of oil. Although still interested in retaining a sizable share of
the global market, the Committee has since refocused its strategy on
establishing a salable quantity that is largely determined by
information on price and available supply as they are affected by the
estimated trade demand.
Although sales had increased somewhat, the Far West's market share
as a percentage of total world sales had not increased on average, and
the market price for Scotch spearmint oil had continued to decline
throughout the 1996-2000 period. During the 1998-1999 and 1999-2000
marketing years, the price paid to producers for Scotch spearmint oil
dropped to a low of $7.00 per pound. Although the current price for
Scotch oil is about $8.00 per pound, the Committee, as well as
spearmint oil producers and handlers attending the October 2, 2002,
meeting, continue to believe that such returns are generally below the
cost of production for most producers. The most recent information
available from the Washington State University Cooperative Extension
Service (WSU), indicates the production costs to be between $13.50 and
$15.00 per pound.
The Committee estimates that acreage of Scotch spearmint has
declined from about 10,000 acres in 1998 to about 4,000 acres
currently. The reduction in acreage is directly attributable to the
relatively low level of producer returns. Based on the reduced Scotch
spearmint acreage, the Committee estimates that production for the
current season (the 2002-2003 marketing season) will be about 472,600
pounds.
The Committee calculated the 2003-2004 Scotch spearmint oil salable
quantity (857,444 pounds) and allotment percentage (45 percent) by
utilizing sales estimates for 2003-2004 Scotch oil as provided by
several of the industry's handlers, as well as historical and current
Scotch oil sales levels. Between June 1, 2002, and September 27, 2002,
415,914 pounds of Scotch oil were sold, a level below the most recent
five-year average of 490,926 pounds. Handlers are estimating that sales
for the 2002-2003 marketing year may range from a low of 700,000 pounds
to a high of 825,000 pounds. With 387,374 pounds carried in to the
current marketing year and an estimated 472,608 pounds being produced,
the total available supply this year, including the 415,914 pounds
already sold, is 859,982 pounds.
The recommendation for the 2003-2004 Scotch spearmint oil volume
regulation is consistent with the Committee's stated intent of keeping
adequate supplies available at all times, while attempting to stabilize
prices at a level adequate to sustain the farmers producing the oil.
Furthermore, the recommendation takes into consideration the industry's
desire to compete with less expensive oil produced outside the
regulated area.
Although Native spearmint oil producers are facing market
conditions similar to those affecting the Scotch spearmint oil market,
unlike Scotch, over 90 percent of the U.S. production of Native
spearmint is produced within the Far West production area. Also, unlike
Scotch, most of the world's supply of Native spearmint is produced in
the U.S.
The current, flat market contributed to the Committee's
recommendation for a salable quantity of 808,528 pounds and an
allotment percentage of 38 percent for Native spearmint oil for the
2003-2004 marketing year. The supply and demand characteristics of the
current Native spearmint oil market are keeping the price relatively
steady at about $9.00 per pound--a level the Committee considers too
low for the majority of producers to maintain viability. The WSU study
referenced earlier indicates that the cost of producing Native
spearmint oil ranges from $10.26 to $10.92 per pound.
Although Native spearmint acreage has decreased about 11 percent
over the last year, the Committee estimates that over a million pounds
of Native oil is expected to be produced this year. With current sales
approximating the five-year average of about 500,000 pounds, the
current season's salable quantity of 800,761 pounds coupled with the
June 1, 2002, carry-in of 202,872 pounds will likely produce a surplus
of oil, adding to the nearly 1.2 million pounds already in reserve.
Handlers are estimating that about 918,750 pounds of Native spearmint
oil, on average, may be sold during the 2003-2004 marketing year. This
estimate, combined with the information available regarding current
supply and price, helped lead the Committee to its recommendation for a
2003-2004 salable quantity of 808,528 pounds. When considered in
conjunction with the estimated carry-in of 104,562 pounds of oil on
June 1, 2003, the recommended salable quantity results in a total
available supply of Native spearmint oil next year of about 913,090
pounds.
Thus, with over 90 percent of the world production currently
located in the Far West, the Committee's method of calculating the
Native spearmint oil salable quantity and allotment percentage
continues to primarily utilize information on price and available
supply as they are affected by the estimated trade demand. The
Committee's stated intent is to make adequate supplies available to
meet market needs and improve producer prices.
Despite the downward trend in the price of both classes of
spearmint oil in recent years, the Committee believes that the order
has contributed extensively to the stabilization of producer prices,
which prior to 1980 experienced wide fluctuations from year to year.
According to the National Agricultural Statistics Service, for example,
the average price paid for both classes of spearmint oil ranged from
about $4.00 per pound to about $12.50 per pound during the period
between 1968 and 1980. Excluding the most recent four marketing years,
prices since the order's inception have generally stabilized at about
$11.00 per pound for Native spearmint oil and at about $13.00 per pound
for Scotch spearmint oil. However, the prices for both classes of oil
have dropped over the last few years due to several factors, including
the general uncertainty being experienced through the U.S. economy and
the continuing overall weak farm situation, as well as an abundant
global supply of spearmint oil. As noted earlier,--although lower than
what producers believe to be viable--prices currently appear to be
stable at about $8.00 for Scotch and $9.00 for Native.
The Committee based its recommendation for the proposed salable
quantity and allotment percentage for each class of spearmint oil for
the 2003-2004 marketing year on the information discussed above, as
well as the data outlined below.
[[Page 11753]]
(1) Class 1 (Scotch) Spearmint Oil
(A) Estimated carry-in on June 1, 2003--43,782 pounds. This figure
is the difference between the estimated 2002-2003 marketing year trade
demand of 816,200 pounds and the revised 2002-2003 marketing year total
available supply of 859,982 pounds. The 2002-2003 marketing year total
available supply was revised due to differences in the carry-in
estimated on October 11, 2001, and the actual carry-in on June 1, 2002,
as well as producer deficiencies on June 1, 2002. A producer is
deficient when the producer is unable or unwilling to produce oil equal
to his or her salable quantity and is unable to fill this deficiency
from reserve pool oil or excess oil from another producer. When prices
are below a producer's cost of production, they generally reduce acres
and produce less oil.
(B) Estimated trade demand for the 2003-2004 marketing year--
822,200 pounds. This figure represents the Committee's estimate based
on the average of the estimates provided by producers at five Scotch
spearmint oil production area meetings held in September 2002, as well
as estimates provided by handlers and others at the October 2, 2002,
meeting. Handler trade demand estimates for the 2003-2004 marketing
year ranged from 750,000 to 800,000 pounds. The average of sales over
the last five years was 912,209 pounds.
(C) Salable quantity required from the 2003-2004 marketing year
production--778,418 pounds. This figure is the difference between the
estimated 2003-2004 marketing year trade demand (822,200 pounds) and
the estimated carry-in on June 1, 2003 (43,782 pounds).
(D) Total estimated allotment base for the 2003-2004 marketing
year--1,905,430 pounds. This figure represents a one-percent increase
over the revised 2002-2003 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
due to the bona fide effort production provisions of Sec. 985.53(e).
The revision is usually minimal.
(E) Computed allotment percentage--40.9 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--45 percent. This
recommendation is based on the Committee's determination that a
decrease from the current season's allotment percentage of 45 percent
to the computed 40.9 percent would not adequately supply the potential
2003-2004 market. The recommended level of 45 percent is slightly
higher than the 22-year average of sales.
(G) The Committee's recommended salable quantity--857,444 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2003-2004 marketing year--
901,226 pounds. This figure is the sum of the 2003-2004 recommended
salable quantity (857,444 pounds) and the estimated carry-in on June 1,
2003 (43,782 pounds).
(2) Class 3 (Native) Spearmint Oil
(A) Estimated carry-in on June 1, 2003--104,562 pounds. This figure
is the difference between the estimated 2002-2003 marketing year trade
demand of 900,000 pounds and the revised 2002-2003 marketing year total
available supply of 1,004,562 pounds.
(B) Estimated trade demand for the 2003-2004 marketing year--
875,000 pounds. This figure is based on input from producers at the
five Native spearmint oil production area meetings held in September
2002, from handlers, and from Committee members and other meeting
participants at the October 2, 2002, meeting. The average estimated
trade demand provided at the five production area meetings was 907,000
pounds, whereas the average handler estimate was 918,750 pounds.
According to the Committee, the more conservative estimate chosen for
the 2003-2004 trade demand figure reflects a general lack of 2003
contract offers to date.
(C) Salable quantity required from the 2003-2004 marketing year
production--770,438 pounds. This figure is the difference between the
estimated 2003-2004 marketing year trade demand (875,000 pounds) and
the estimated carry-in on June 1, 2003 (104,562 pounds).
(D) Total estimated allotment base for the 2003-2004 marketing
year--2,127,706 pounds. This figure represents a one percent increase
over the revised 2002-2003 total allotment base. This figure is
generally revised each year on June 1 due to producer base being lost
due to the bona fide effort production provisions of Sec. 985.53(e).
The revision normally involves a minimal amount of spearmint oil.
(E) Computed allotment percentage--36.2 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--38 percent. This is the
Committee's recommendation based on the computed allotment percentage,
the average of the computed allotment percentage figures from the five
production area meetings (38.6 percent), and input from producers and
handlers at the October 2, 2002, meeting.
(G) The Committee's recommended salable quantity--808,528 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2003-2004 marketing year--
913,090 pounds. This figure is the sum of the 2003-2004 recommended
salable quantity (808,528 pounds) and the estimated carry-in on June 1,
2003 (104,562 pounds).
The salable quantity is the total quantity of each class of
spearmint oil, which handlers may purchase from, or handle on behalf of
producers during a marketing year. Each producer is allotted a share of
the salable quantity by applying the allotment percentage to the
producer's allotment base for the applicable class of spearmint oil.
The Committee's recommended Scotch and Native spearmint oil salable
quantities and allotment percentages of 857,444 pounds and 45 percent
and 808,528 and 38 percent, respectively, are based on the Committee's
goal of maintaining market stability by avoiding extreme fluctuations
in supplies and prices and the anticipated supply and trade demand
during the 2003-2004 marketing year. The proposed salable quantities
are not expected to cause a shortage of spearmint oil supplies. Any
unanticipated or additional market demand for spearmint oil, which may
develop during the marketing year, can be satisfied by an increase in
the salable quantities. Both Scotch and Native spearmint oil producers
who produce more than their annual allotments during the 2003-2004
season may transfer such excess spearmint oil to a producer with
spearmint oil production less than his or her annual allotment or put
it into the reserve pool.
This proposed regulation, if adopted, would be similar to those,
which have been issued, in prior seasons. Costs to producers and
handlers resulting from this proposed action are expected to be offset
by the benefits derived from a stable market and improved returns. In
conjunction with the issuance of this proposed rule, USDA has reviewed
the Committee's marketing policy statement for the 2003-2004 marketing
year. The Committee's marketing policy statement, a requirement
whenever the Committee recommends volume
[[Page 11754]]
regulations, fully meets the intent of Sec. 985.50 of the order.
During its discussion of potential 2003-2004 salable quantities and
allotment percentages, the Committee considered: (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) prospective
production of each class of oil; (4) 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.
Conformity with the USDA's ``Guidelines for Fruit, Vegetable, and
Specialty Crop Marketing Orders'' has also been reviewed and confirmed.
The establishment of these salable quantities and allotment
percentages would allow for anticipated market needs. In determining
anticipated market needs, consideration by the Committee was given to
historical sales, as well as changes and trends in production and
demand. This rule also provides producers with information on the
amount of spearmint oil, which should be produced for next season in
order to meet anticipated market demand.
Initial 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 initial 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 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 7 spearmint oil handlers subject to regulation under the
order, and approximately 98 producers of Class 1 (Scotch) spearmint oil
and approximately 100 producers of Class 3 (Native) spearmint oil in
the regulated production area. Small agricultural service firms are
defined by the Small Business Administration (SBA)(13 CFR 121.201) as
those having annual receipts of less than $5,000,000, and small
agricultural producers are defined as those whose annual receipts are
less than $750,000.
Based on the SBA's definition of small entities, the Committee
estimates that 2 of the 7 handlers regulated by the order could be
considered small entities. Most of the handlers are large corporations
involved in the international trading of essential oils and the
products of essential oils. In addition, the Committee estimates that
11 of the 98 Scotch spearmint oil producers and 13 of the 100 Native
spearmint oil producers could be classified as small entities under the
SBA definition. Thus, a majority of handlers and producers of Far West
spearmint oil may not be classified as small entities.
The Far West spearmint oil industry is characterized by producers
whose farming operations generally involve more than one commodity, and
whose income from farming operations is not exclusively dependent on
the production of spearmint oil. A typical spearmint oil-producing
operation has enough acreage for rotation such that the total acreage
required to produce the crop is about one-third spearmint and two-
thirds rotational crops. Thus, the typical spearmint oil farmer has to
have considerably more acreage than is planted to spearmint during any
given season. Crop rotation is an essential cultural practice in the
production of spearmint oil for weed, insect, and disease control. To
remain economically viable with the added costs associated with
spearmint oil production, most spearmint oil-producing farms fall into
the SBA category of large businesses.
This proposed rule would establish the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle for, producers during the 2003-2004 marketing year. The
Committee recommended this rule to help maintain stability in the
spearmint oil market by avoiding extreme fluctuations in supplies and
prices. Establishing quantities to be purchased or handled during the
marketing year through volume regulations allows growers to plan their
mint planting and harvesting to meet expected market needs. The
provisions of Sec. Sec. 985.50, 985.51, and 985.52 of the order
authorize this action.
Small spearmint oil producers generally are not as extensively
diversified as larger ones and as such are more at risk to market
fluctuations. Such small farmers generally need to market their entire
annual crop and do not have the luxury of having other crops to cushion
seasons with poor spearmint oil returns. Conversely, large diversified
producers have the potential to endure one or more seasons of poor
spearmint oil markets because incomes from alternate crops could
support the operation for a period of time. Being reasonably assured of
a stable price and market provides small producing entities with the
ability to maintain proper cash flow and to meet annual expenses. Thus,
the market and price stability provided by the order potentially
benefit the small producer more than such provisions benefit large
producers. Even though a majority of handlers and producers of
spearmint oil may not be classified as small entities, the volume
control feature of this order has small entity orientation.
Demand for spearmint oil tends to be relatively stable from year-
to-year. The demand for spearmint oil is expected to grow slowly for
the foreseeable future because the demand for consumer products that
use spearmint oil will likely expand slowly, in line with population
growth.
Demand for spearmint oil at the farm level is derived from retail
demand for spearmint-flavored products at retail such as chewing gum,
toothpaste, and mouthwash. The manufacturers of these products are by
far the largest users of mint oil. However, spearmint flavoring is
generally a very minor component of the products in which it is used,
so changes in the raw product price have no impact on retail prices for
those goods.
Spearmint oil production tends to be cyclical. Years of large
production, with demand remaining reasonably stable, have led to
periods in which large producer stocks of unsold spearmint oil have
depressed producer prices for a number of years. Shortages and high
prices may follow in subsequent years, as producers respond to price
signals by cutting back production.
The wide fluctuations in supply and prices that result from this
cycle, which was even more pronounced before the creation of the
marketing order, can create liquidity problems for some producers. The
marketing order was designed to reduce the price impacts of the
cyclical swings in production. However, producers have been less able
to weather these cycles in recent years because of the decline in
prices of many of the alternative crops they grow. As noted earlier,
almost all spearmint oil producers diversify by growing other crops.
Instability in the spearmint oil sub sector of the mint industry is
much more likely to originate on the supply side than the demand side.
Fluctuations in yield and acreage planted from
[[Page 11755]]
season-to-season tend to be larger than fluctuations in the amount
purchased by buyers.
The significant variability is illustrated by the fact that between
1980 and 2001, the coefficient of variation (CV) of northwest spearmint
oil production was about 0.24. The CV is a standard measure of
variability above and below the average production level of 1,880,727
pounds. Production in the shortest crop year was about 48 percent of
the 22-year average and the largest crop was approximately 164 percent.
A key consequence is that in years of oversupply and low prices, the
season average producer price of spearmint oil is below the average
cost of production (as measured by the Washington State University
Cooperative Extension Service).
Over the 22-year period, the CV for spearmint oil prices was about
0.13, well below the CV for production. This provides an indication of
the price stabilizing impact of the marketing order.
In an effort to stabilize prices, the spearmint oil industry uses
the volume control mechanisms authorized under the order. This
authority allows the Committee to recommend a salable quantity and
allotment percentage for each class of oil for the upcoming marketing
year. The salable quantity for each class of oil is the total volume of
oil that producers may sell during the marketing year. The allotment
percentage for each class of spearmint oil is derived by dividing the
salable quantity by the total allotment base.
Each producer is then issued an annual allotment certificate, in
pounds, for the applicable class of oil, which is calculated by
multiplying the producer's allotment base by the applicable allotment
percentage. This is the amount of oil for the applicable class that the
producer can sell.
By November 1 of each year, the Committee identifies any oil that
individual producers have produced above the volume specified on their
annual allotment certificates. This excess oil is placed in a reserve
pool administered by the Committee.
There is a reserve pool for each class of oil that may not be sold
during the current marketing year unless the Secretary approves a
Committee recommendation to make a portion of the pool available.
However, limited quantities of reserve oil are typically sold to fill
deficiencies. A deficiency occurs when on-farm production is less than
a producer's allotment. In that case, a producer's own reserve oil can
be sold to fill that deficiency. Excess production (higher than the
producer's allotment) can be sold to fill other producers'
deficiencies.
In any given year, the total available supply of spearmint oil is
composed of current production plus carry-over stocks from the previous
crop. The Committee seeks to maintain market stability by balancing
supply and demand, and to close the marketing year with an appropriate
level of carry-out. If the industry has production in excess of the
salable quantity, then the reserve pool absorbs the surplus quantity of
spearmint oil, which goes unsold during that year, unless the oil is
needed for unanticipated sales.
Under its provisions, the order may attempt to stabilize prices by
(1) limiting supply and establishing reserves in high production years,
thus minimizing the price-depressing effect that excess producer stocks
have on unsold spearmint oil, and (2) ensuring that stocks are
available in short supply years when prices would otherwise increase
dramatically. The reserve pool stocks grown in large production years
are drawn down in short crop years.
An econometric model was used to assess the impact that volume
control has on the prices producers receive for their commodity.
Without volume control, spearmint oil markets would likely be over-
supplied, resulting in low producer prices and a large volume of oil
stored and carried over to the next crop year. The model estimates how
much lower producer prices would likely be in the absence of volume
controls.
The Committee estimated the available supply during the 2003-2004
marketing year for both classes of oil at 1,814,356 pounds, and that
the expected carry-in will be 148,344 pounds. Therefore, with volume
control, sales by producers for the 2003-2004 marketing year should be
limited to 1,665,972 pounds (the recommended salable quantity for both
classes of spearmint oil).
The recommended salable percentages, upon which 2003-2004 producer
allotments are based, are 45 percent for Scotch and 38 percent for
Native. Without volume controls, producers would not be limited to
these allotment levels, and could produce and sell additional
spearmint. The econometric model estimated a $1.57 decline in the
season average grower price per pound (from both classes of spearmint
oil) resulting from the higher quantities that would be produced and
marketed without volume control. Northwest grower prices for both
classes of spearmint oil averaged $8.86 for 2000 and 2001, based on
National Agricultural Statistics Service data, continuing a downward
decline in recent years. The severe surplus situation for the spearmint
oil market that would exist without volume controls in 2003-2004 also
would likely dampen prospects for improved grower prices in future
years because of the buildup in stocks.
The use of volume controls allows the industry to fully supply
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume controls is believed to have
little or no effect on consumer prices of products containing spearmint
oil and will 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
discussed and rejected the idea of recommending that there not be any
volume regulation for Scotch spearmint oil because of the severe price-
depressing effects that would occur without volume control.
The Committee also considered various alternative levels of volume
control for Scotch spearmint oil, including leaving the percentage the
same as the current season, increasing the percentage to a less
restrictive level, or decreasing the percentage. After considerable
discussion in which there was no support for increasing the percentage
and minimal support for decreasing it, the Committee chose to remain at
the current level (45 percent). One Committee member voted in favor of
establishing an allotment percentage of 40 percent due to his belief
that anything more would not help improve the current depressed prices
growers are receiving for their oil.
The Committee also discussed alternative allotment percentage
levels for Native spearmint oil. With the current price for Native
spearmint oil lower than the 20-year average, and demand fairly flat,
the Committee, after considerable discussion, determined that 808,528
pounds and 38 percent would be the most effective salable quantity and
allotment percentage, respectively, for the 2003-2004 marketing year.
With a market situation similar to that of Scotch, none of those in
attendance at the October 2, 2002, meeting were in support of a higher
level of volume regulation, and only a few voiced support for levels
less than 38 percent. After considerable discussion, the Committee
unanimously supported the recommendation contained herein.
As noted earlier, the Committee's recommendation to establish
salable quantities and allotment percentages for both classes of
spearmint oil was made
[[Page 11756]]
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
quantity and allotment percentage levels recommended would achieve the
objectives sought.
Without any regulations in effect, the Committee believes the
industry would return to the pronounced cyclical price patterns that
occurred prior to the order, and that prices in 2003-2004 would decline
substantially below current levels.
As stated earlier, the Committee believes that the order has
contributed extensively to the stabilization of producer prices, which
prior to 1980 experienced wide fluctuations from year-to-year. National
Agricultural Statistics Service records show that the average price
paid for both classes of spearmint oil ranged from about $4.00 per
pound to about $12.50 per pound during the period between 1968 and
1980. Prices have been consistently more stable since the marketing
order's inception in 1980. For much of the 1990's, prices had
stabilized at about $13.00 per pound for Scotch spearmint oil and about
$11.00 per pound for Native spearmint oil.
Over the last four years, however, large production and carry-in
inventories have contributed to declining prices, despite the
Committee's efforts to balance available supplies with demand. Further,
over the same period, prices have ranged from $8.00 to $11.00 per pound
for Scotch spearmint oil and between $9.00 to $10.00 per pound for
Native spearmint oil.
According to the Committee, the recommended salable quantities and
allotment percentages are expected to achieve the goals of market and
price stability.
As previously stated, annual salable quantities and allotment
percentages have been issued for both classes of spearmint oil since
the order's inception. Reporting and recordkeeping requirements have
remained the same for each year of regulation. These requirements have
been approved by the Office of Management and Budget under OMB Control
No. 0581-0065. Accordingly, this action would not impose any additional
reporting or recordkeeping requirements on either small or large
spearmint oil producers and handlers. All reports and forms associated
with this program are reviewed periodically in order to avoid
unnecessary and duplicative information collection by industry and
public sector agencies. The USDA has not identified any relevant
Federal rules that duplicate, overlap, or conflict with this proposed
rule.
The Committee's meeting was widely publicized throughout the
spearmint oil industry and all interested persons were invited to
attend and participate on all issues. In addition, interested persons
are invited to submit information on 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: http:/
/www.ams.usda.gov/fv/moab.html.
Any questions about the compliance
/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.
A 20-day comment period is provided to allow interested persons the
opportunity to respond to the proposal, including any regulatory and
informational impacts of this action on small businesses. This comment
period is deemed appropriate so that a final determination can be made
prior to June 1, 2003, the beginning of the 2003-2004 marketing year.
All written comments received within the comment period 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, 7 CFR Part 985 is
proposed to be amended as follows:
PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST
1. The authority citation for 7 CFR Part 985 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. A new Sec. 985.222 is added to read as follows:
[Note: This section will not appear in the Code of Federal
Regulations.]
Sec. 985.222 Salable quantities and allotment percentages--2003-2004
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2003,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 857,444 pounds and
an allotment percentage of 45 percent.
(b) Class 3 (Native) oil--a salable quantity of 808,528 pounds and
an allotment percentage of 38 percent.
Dated: March 6, 2003.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 03-5842 Filed 3-11-03; 8:45 am]
BILLING CODE 3410-02-U