[Federal Register: March 22, 2004 (Volume 69, Number 55)]
[Rules and Regulations]
[Page 13213-13218]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22mr04-1]
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Rules and Regulations
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[[Page 13213]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Docket No. FV04-985-1 FR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2004-2005 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule establishes the quantity of spearmint oil produced
in the Far West, by class, that handlers may purchase from, or handle
for, producers during the 2004-2005 marketing year, which begins on
June 1, 2004. This rule establishes salable quantities and allotment
percentages for Class 1 (Scotch) spearmint oil of 766,880 pounds and 40
percent, respectively, and for Class 3 (Native) spearmint oil of
773,474 pounds and 36 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 these limitations for the purpose of avoiding
extreme fluctuations in supplies and prices and to help maintain
stability in the spearmint oil market.
EFFECTIVE DATE: June 1, 2004, through May 31, 2005.
FOR FURTHER INFORMATION CONTACT: Susan M. Hiller, Northwest Marketing
Field Office, 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 final rule 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 final rule has been reviewed under Executive Order 12988,
Civil Justice Reform. Under the marketing order now in effect, salable
quantities and allotment percentages may be established for classes of
spearmint oil produced in the Far West. This rule establishes the
quantity of spearmint oil produced in the Far West, by class, which may
be purchased from or handled for producers by handlers during the 2004-
2005 marketing year, which begins on June 1, 2004. 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. Such
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 all of its eight members present, met on
October 8, 2003, and recommended salable quantities and allotment
percentages for both classes of oil for the 2004-2005 marketing year.
The Committee unanimously recommended the establishment of a salable
quantity and allotment percentage for Scotch spearmint oil of 766,880
pounds and 40 percent, respectively. For Native spearmint oil, with six
members in favor, one opposed, and one abstention, the Committee
recommended the establishment of a salable quantity and allotment
percentage of 773,474 pounds and 36 percent, respectively.
This final rule limits the amount of spearmint oil that handlers
may purchase from, or handle for, producers during the 2004-2005
marketing year, which begins on June 1, 2004. Salable quantities and
allotment percentages have been placed into effect each season since
the order's inception in 1980.
The U.S. production of Scotch spearmint oil is concentrated in the
Far West, which includes Washington, Idaho, and Oregon and a portion of
Nevada and Utah. Scotch spearmint oil is also produced in the Midwest
states of Indiana, Michigan, and Wisconsin, as well as in the states of
Montana, South Dakota, North Dakota, and Minnesota. The production area
covered by the marketing order currently accounts for approximately 65
percent of the annual U.S. sales of Scotch spearmint oil.
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 sales from the regulated production
area in the Far West. During the period from 1981 to 1990 the Far West
sales declined to an average of 67 percent of the world's Scotch
spearmint oil. Sales from the Far West continued to decline during the
period from 1991 to 2000 to an average of 44 percent of the world's
Scotch spearmint oil. It is estimated for 2003 that the Far West will
decline to
[[Page 13214]]
30 percent of the world's Scotch spearmint oil sales.
The steady decline in world sales for the Far West region is
directly attributed to the increase in global production. Other factors
that have played a significant role include the overall quality of the
imported oil and technological advances that allow for more blending of
lower quality oils. Such factors have provided the Committee with
challenges in accurately predicting trade demand for Scotch oil. This,
in turn, has made it difficult to balance available supplies with needs
and to achieve the Committee's overall goal of stabilizing producer and
market prices.
The marketing order has continued to contribute to price and
general market stabilization for Far West producers. The Committee, as
well as spearmint oil producers and handlers attending the October 8,
2003, meeting estimated that the 2003 producer price of Scotch oil
would average $9.50 per pound, which represents the fourth price
increase since 1999. However, this producer price is below the cost of
production for most producers as indicated in a study from the
Washington State University Cooperative Extension Service (WSU), which
estimates production costs to be between $13.50 and $15.00 per pound.
This low level of producer returns has caused a reduction in
acreage. The Committee estimates that the acreage of Scotch spearmint
has declined from about 10,000 acres in 1998 to about 4,372 acres
currently. Based on the reduced Scotch spearmint acreage, the Committee
estimates that production for the current season (the 2003-2004
marketing season) will be about 565,261 pounds.
The Committee recommended the 2004-2005 Scotch spearmint oil
salable quantity (766,880 pounds) and allotment percentage (40 percent)
utilizing sales estimates for 2004-2005 Scotch oil as provided by
several of the industry's handlers, as well as historical and current
Scotch oil sales levels. Between June 1, 2003, and September 30, 2003,
143,124 pounds of Scotch oil were sold, a level dramatically below the
most recent five-year average for this four-month period of 448,084
pounds. Handlers are estimating that sales for the 2003-2004 marketing
year may range from a low of 600,000 pounds to a high of 750,000
pounds. With 354,053 pounds carried into the current marketing year and
an estimated 565,261 pounds being produced, the total available supply
for 2003-2004, including the 650,000 pounds already sold, is 919,314
pounds.
The recommendation for the 2004-2005 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 producers. 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 United States.
The current, flat market contributed to the Committee's
recommendation for a salable quantity of 773,474 pounds and an
allotment percentage of 36 percent for Native spearmint oil for the
2004-2005 marketing year. The supply and demand characteristics of the
current Native spearmint oil market are keeping the price relatively
steady at about $9.50 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.
The Committee estimates that 853,820 pounds of Native oil is
expected to be produced this year (2003-2004). With current sales
approximating the five-year average of about 1,021,702 pounds, the
current season's salable quantity of 808,993 pounds coupled with the
June 1, 2003, carry-in of 163,617 pounds will likely produce a surplus
of oil, adding to the nearly 1.4 million pounds already in reserve. The
Committee is estimating that about 865,000 pounds of Native spearmint
oil, on average, may be sold during the 2004-2005 marketing year. This
estimate, combined with the information available regarding current
supply and price, helped lead the Committee to its recommendation for a
2004-2005 salable quantity of 773,474 pounds. When considered in
conjunction with the estimated carry-in of 130,610 pounds of oil on
June 1, 2004, the recommended salable quantity results in a total
available supply of Native spearmint oil next year of about 904,084
pounds.
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.
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 $4.00 per
pound to $11.10 per pound during the period between 1968 and 1980.
Prices since the order's inception have generally stabilized at about
$9.88 per pound for Native spearmint oil and at about $13.04 per pound
for Scotch spearmint oil. However, the current prices for both classes
of oil are below the average 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 $9.50 for both classes of oil.
The Committee based its recommendation for the salable quantity and
allotment percentage for each class of spearmint oil for the 2004-2005
marketing year on the information discussed above, as well as the data
outlined below.
(1) Class 1 (Scotch) Spearmint Oil
(A) Estimated carry-in on June 1, 2004-269,314 pounds. This figure
is the difference between the estimated 2003-2004 marketing year trade
demand of 650,000 pounds and the 2003-2004 marketing year total
available supply of 919,314 pounds.
(B) Estimated trade demand for the 2004-2005 marketing year--
650,000 pounds. This figure represents the Committee's estimate based
on the average of the estimates provided by producers at six Scotch
spearmint oil production area meetings held in September 2003, as well
as estimates provided by handlers and others at the October 8, 2003,
meeting. Handler trade demand estimates for the 2004-2005 marketing
year ranged from 600,000 to 750,000 pounds. The average of sales over
the last five years was 827,522 pounds.
(C) Salable quantity required from the 2004-2005 marketing year
production--380,686 pounds. This figure is the difference between the
estimated 2004-2005 marketing year trade demand (650,000 pounds) and
the estimated
[[Page 13215]]
carry-in on June 1, 2004 (269,314 pounds).
(D) Total estimated allotment base for the 2004-2005 marketing
year--1,917,200 pounds. This figure represents a one-percent increase
over the revised 2003-2004 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--19.9 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--40 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 19.9 percent would not adequately supply the potential
2004-2005 market.
(G) The Committee's recommended salable quantity--766,880 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2004-2005 marketing year--
1,036,194 pounds. This figure is the sum of the 2004-2005 recommended
salable quantity (766,880 pounds) and the estimated carry-in on June 1,
2004 (269,314 pounds).
(2) Class 3 (Native) Spearmint Oil
(A) Estimated carry-in on June 1, 2004--130,610 pounds. This figure
is the difference between the estimated 2003-2004 marketing year trade
demand of 842,000 pounds and the revised 2003-2004 marketing year total
available supply of 972,610 pounds.
(B) Estimated trade demand for the 2004-2005 marketing year--
865,000 pounds. This figure is based on input from producers at the
five Native spearmint oil production area meetings held in September
2003, from handlers, and from Committee members and other meeting
participants at the October 8, 2003, meeting. The average estimated
trade demand provided at the five production area meetings was 875,400
pounds, whereas the average handler estimate was 885,000 pounds. The
Committee discussed several estimates below these figures to take into
consideration a general lack of 2004 contract offers to date.
(C) Salable quantity required from the 2004-2005 marketing year
production--734,390 pounds. This figure is the difference between the
estimated 2004-2005 marketing year trade demand (865,000 pounds) and
the estimated carry-in on June 1, 2004 (130,610 pounds).
(D) Total estimated allotment base for the 2004-2005 marketing
year--2,148,539 pounds. This figure represents a one percent increase
over the revised 2003-2004 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--34.2 percent. This percentage is
computed by dividing the required salable quantity by the total
estimated allotment base.
(F) Recommended allotment percentage--36 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 (36.5 percent), and input from producers and
handlers at the October 8, 2003, meeting.
(G) The Committee's recommended salable quantity--773,474 pounds.
This figure is the product of the recommended allotment percentage and
the total estimated allotment base.
(H) Estimated available supply for the 2004-2005 marketing year--
904,084 pounds. This figure is the sum of the 2004-2005 recommended
salable quantity (773,474 pounds) and the estimated carry-in on June 1,
2004 (130,610 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 766,880 pounds and 40 percent
and 773,474 and 36 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 2004-2005 marketing year. The 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 2004-2005
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 regulation is similar to regulations issued in prior seasons.
Costs to producers and handlers resulting from this rule are expected
to be offset by the benefits derived from a stable market and improved
returns. In conjunction with the issuance of this final rule, USDA has
reviewed the Committee's marketing policy statement for the 2004-2005
marketing year. The Committee's marketing policy statement, a
requirement whenever the Committee recommends volume regulations, fully
meets the intent of Sec. 985.50 of the order. During its discussion of
potential 2004-2005 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 will 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 that should be produced for next season in
order to meet anticipated market demand.
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 rule 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
[[Page 13216]]
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 8 spearmint oil handlers subject to regulation under the
order, and approximately 84 producers of Class 1 (Scotch) spearmint oil
and approximately 97 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 8 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
16 of the 84 Scotch spearmint oil producers and 15 of the 97 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 producer 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 final rule establishes the quantity of spearmint oil produced
in the Far West, by class, that handlers may purchase from, or handle
for, producers during the 2004-2005 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 producers to plan their
spearmint 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 rule.
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 producers 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 income 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.
Instability in the spearmint oil subsector 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 season-to-season tend to
be larger than fluctuations in the amount purchased by buyers. 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 significant variability is illustrated by the fact that the
coefficient of variation (a standard measure of variability; ``CV'') of
Far West spearmint oil production from 1980 through 2002 was about
0.24. 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.
Production in the shortest marketing year was about 49 percent of
the 23-year average (1,870,783 pounds from 1980 through 2002) and the
largest crop was approximately 165 percent of the 23-year average. 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).
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.
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
[[Page 13217]]
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 carryout. 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 grow in large production years
and are drawn down in short marketing 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 marketing 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 2004-2005
marketing year for both classes of oil at 1,940,278 pounds, and that
the expected carry-in will be 399,924 pounds. With volume control,
sales by producers for the 2004-2005 marketing year should be limited
to 1,540,354 pounds (the recommended salable quantity for both classes
of spearmint oil).
The recommended salable percentages, upon which 2004-2005 producer
allotments are based, are 40 percent for Scotch and 36 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 $1.71 decline in the
season average producer price per pound (from both classes of spearmint
oil) resulting from the higher quantities that would be produced and
marketed without volume control. The Far West producer price for both
classes of spearmint oil was $9.20 for 2002, which is below the average
of $10.97 for the period from 1980 through 2002, based on National
Agricultural Statistics Service data. The surplus situation for the
spearmint oil market that would exist without volume controls in 2004-
2005 also would likely dampen prospects for improved producer 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 the Committee unanimously supported decreasing the
percentage to 40 percent.
The Committee discussed and rejected the idea of recommending that
there not be any volume regulation for Native spearmint oil. The
immediate result would be to put an excessive amount of Native reserve
pool oil on the market, causing depressed prices at the producer level.
With the current price for Native spearmint oil lower than the 10-year
average, and sales at the lowest level since 1987, the Committee, after
considerable discussion, determined that 773,474 pounds and 36 percent
would be the most effective salable quantity and allotment percentage,
respectively, for the 2004-2005 marketing year. The dissenting
Committee member felt that the recommended allotment percentage should
have been lower, since the recommended salable quantity will likely be
too high for market conditions, since demand has been flat.
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 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 2004-2005 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 $4.00 per pound to
$11.10 per pound during the period between 1968 and 1980. Prices have
been consistently more stable since the marketing order's inception in
1980, with an average price of $13.04 per pound for Scotch spearmint
oil (1980-2002) and $9.88 per pound for Native spearmint oil.
During the period of 1999 through 2002, however, large global
production and carry-in inventories have contributed to prices below
the 23-year average, despite the Committee's efforts to balance
available supplies with demand. Prices have ranged from $8.00 to $10.00
per pound for Scotch spearmint oil and between $9.10 to $9.20 per pound
for Native spearmint oil.
According to the Committee, the recommended salable quantities and
[[Page 13218]]
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 rule will 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 rule.
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 8, 2003, meeting was a
public meeting and all entities, both large and small, were able to
express views on this issue. Finally, interested persons were invited
to submit information on the regulatory and informational impacts of
this action on small businesses.
A proposed rule concerning this action was published in the Federal
Register on January 23, 2004 (69 FR 3272). Copies of the rule were
provided to Committee staff, which in turn made it available to
spearmint oil producers, handlers, and other interested persons.
Finally, the rule was made available through the Internet by the Office
of the Federal Register and USDA. A 30-day comment period ending
February 23, 2004, was provided to allow interested persons to respond
to the proposal. 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 matter presented, including the
information and recommendation submitted by the Committee and other
available information, it is hereby found that this rule, as
hereinafter set forth, will tend to effectuate the declared policy of
the Act.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats, Reporting and recordkeeping
requirements, Spearmint oil.
0
For the reasons set forth in the preamble, 7 CFR part 985 is amended 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. A new Sec. 985.223 is added to read as follows:
[Note: This section will not appear in the Code of Federal
Regulations.]
Sec. 985.223 Salable quantities and allotment percentages--2004-2005
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2004,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 766,880 pounds and
an allotment percentage of 40 percent.
(b) Class 3 (Native) oil--a salable quantity of 773,474 pounds and
an allotment percentage of 36 percent.
Dated: March 15, 2004.
A.J. Yates,
Administrator, Agricultural Marketing Service.
[FR Doc. 04-6324 Filed 3-19-04; 8:45 am]
BILLING CODE 3410-02-P