[Federal Register Volume 66, Number 124 (Wednesday, June 27, 2001)]
[Rules and Regulations]
[Pages 34332-34352]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-16109]
[[Page 34331]]
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Part II
Department of Agriculture
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Agricultural Marketing Service
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7 CFR Part 929
Cranberries Grown in the States of Massachusetts, et al.; Establishment
of Marketable Quantity and Allotment Percentage; Reformulation of Sales
Histories and Other Modifications Under the Cranberry Marketing Order;
Final Rule
Federal Register / Vol. 66, No. 124 / Wednesday, June 27, 2001 /
Rules and Regulations
[[Page 34332]]
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DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 929
[Docket Nos. FV01-929-2 FR and FV00-929-7 FR]
Cranberries Grown in the States of Massachusetts, et al.;
Establishment of Marketable Quantity and Allotment Percentage;
Reformulation of Sales Histories and Other Modifications Under the
Cranberry Marketing Order
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
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SUMMARY: This rule establishes a marketable quantity of 4.6 million
barrels and an allotment percentage of 65 percent for the 2001-02
cranberry season which begins September 1. The marketable quantity is
the total amount of fruit that handlers may purchase from, or handle
for, growers during the season. Fresh and organically-grown cranberries
are exempt from the volume limitations to facilitate marketing of these
products. This final rule also modifies the way growers' sales
histories are calculated (including deducting fresh sales), streamlines
the sales history appeals procedure, adds a deadline for transfers of
sales histories, clarifies the outlets for excess cranberries, and
withdraws a proposed reinstatement of the June 1 allotment notification
date. These actions are designed to stabilize cranberry market
conditions, improve grower returns, provide for a more equitable
allocation of the marketable quantity among growers, and improve the
administration of the cranberry producer allotment program.
EFFECTIVE DATE: This final rule becomes effective June 28, 2001.
FOR FURTHER INFORMATION CONTACT: Patricia A. Petrella or Kenneth G.
Johnson, DC Marketing Field Office, Fruit and Vegetable Programs, AMS,
USDA, Suite 2A04, Unit 155, 4700 River Road, Riverdale, Maryland 20737;
telephone: (301) 734-5243, Fax: (301) 734-5275; or Kathleen M. Finn,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, room 2525-S, P.O. Box 96456, Washington, DC 20090-6456;
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, P.O. Box 96456, room
2525-S, Washington, DC 20090-6456; telephone: (202) 720-2491, Fax:
(202) 720-8938, or E-mail: [email protected].
SUPPLEMENTARY INFORMATION: This final rule is issued under Marketing
Order No. 929 (7 CFR part 929), as amended, regulating the handling of
cranberries grown in Massachusetts, Rhode Island, Connecticut, New
Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long
Island in the State of New York. The order is effective under the
Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-
674), hereinafter referred to as the ``Act.''
Question and Answer Overview
When Will This Final Rule Be Effective?
The final rule is effective on June 28, 2001, and the volume
regulation will apply to the 2001-2002 crop year which begins on
September 1, 2001, and ends on August 31, 2002.
Who Will Be Affected by This Action?
Cranberry growers and handlers/processors located in the 10-State
production area will be affected by this action. The 10-State
production area covers Massachusetts, Rhode Island, Connecticut, New
Jersey, Wisconsin, Michigan, Minnesota, Oregon, Washington, and Long
Island in the State of New York.
Why Is Volume Control Being Implemented This Year?
In recent years, cranberry production has exceeded market demand,
resulting in building inventories and dramatic declines in grower
prices. In 2000, the Cranberry Marketing Committee (Committee)
recommended the use of volume regulation to bring supplies more in line
with demand. The Committee recommended using regulation again in the
upcoming season to continue the effort to restore economic health to
the cranberry industry.
The use of volume control is not the only avenue that is being used
to address the current oversupply situation. The industry is also
looking into methods of increasing demand by developing new markets,
both domestic and foreign, developing new products, and increasing
promotion efforts.
What Is Marketable Quantity and Allotment Percentage?
Marketable quantity is defined as the number of pounds of
cranberries needed to meet total market demand and to provide for an
adequate carryover into the next season. The marketable quantity for
the 2001-2002 crop year is being established at 4.6 million barrels.
Sales of fresh and organically-grown fruit are exempt from the volume
regulation.
The allotment percentage equals the marketable quantity divided by
the total of all growers' sales histories. Total growers' sales
histories were set by the Committee at 7.1 million barrels. Using the
formula established under the order (4.6 million barrels divided by 7.1
million barrels), the annual allotment percentage is 65 percent.
How Are Growers' Annual Allotments Calculated?
A grower's annual allotment is the result of multiplying the
individual grower's sales history by the 65 percent allotment
percentage.
How Will Sales Histories Be Calculated This Year?
The Committee is responsible for calculating each grower's sales
history on an annual basis. The way sales histories are being
calculated for the 2001-2002 season is modified so that the marketable
quantity is apportioned more equitably among producers.
For growers with 7 or more years of sales history, a new sales
history will be computed using an average of the highest 4 of the most
recent 7 years of sales. For growers with 6 years of sales history, a
new sales history shall be computed by averaging the highest 4 of the
most recent 6 years.
For growers with 5 years of sales history, a new sales history will
computed by averaging the highest 4 of the 5 years. Additional sales
history will be added for acreage planted in 1995 or later in
accordance with a formula developed by the Committee.
For growers whose acreage has 5 years of sales history and was
planted in 1995 or later, the sales history will be computed by
averaging the highest 4 of the 5 years and adjusting in accordance with
the established formula. For growers whose acreage has 4 years of sales
history, the sales history will be computed by averaging all 4 years
and adjusting in accordance with the established formula. For growers
whose acreage has 1 to 3 years of sales history, the sales history will
be computed by dividing the total years' sales by 4 and adjusting in
accordance with the established formula.
For growers with acreage with no sales history or for the first
harvest of replanted acres, the sales history will be 75 barrels per
acre for acres planted or replanted in 2000 and first harvested in
2001, and 156 barrels per acre for acres
[[Page 34333]]
planted or replanted in 1999 and first harvested in 2001.
In addition, fresh sales will be deducted from each grower's sales
history. This is because fresh fruit sales are exempt from volume
regulation.
Do Growers Have Recourse if They Are Not Satisfied With Their Sales
History Calculation?
If growers are dissatisfied with their sales history as calculated
by the Committee, they can appeal to the appeals subcommittee appointed
by the Committee. If growers are not satisfied with the decision by the
appeals subcommittee, they may further appeal to the Secretary of
Agriculture. All decisions by the Secretary will be final.
Growers may appeal if they believe the figures used in the sales
history calculation are incorrect or if they believe the calculation
was incorrectly performed by the Committee staff.
Appeals should be filed with David N. Farrimond, General Manager,
Cranberry Marketing Committee, 266 Main Street, Wareham, Massachusetts
02571; Telephone: (800) 253-0862; or Fax (508) 291-1511.
Executive Orders 12866 and 12988
The Department of Agriculture (Department) is issuing this final
rule in conformance with Executive Order 12866.
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Under the marketing order provisions now in effect, a
marketable quantity and allotment percentage may be established for
cranberries during a crop year. This rule establishes the quantity of
cranberries that handlers may purchase from, or handle for, growers
during the 2001-2002 crop year beginning September 1, 2001, through
August 31, 2002. This rule also modifies the way growers' sales
histories are calculated; streamlines the sales history appeal process;
adds a deadline for transfers of sales histories; clarifies provisions
pertaining to the use of excess cranberries; and withdraws a proposed
reinstatement of the June 1 allotment notification date. This action
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 the Secretary 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 the Secretary 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 the Secretary's
ruling on the petition, provided an action is filed not later than 20
days after the date of the entry of the ruling.
Introduction
The U.S. cranberry industry is experiencing an oversupply
situation. Recent increases in acreage and yields have resulted in
greater supplies, while demand has remained fairly constant. The result
has been building inventories and reduced grower returns.
In recent years, the Committee has been considering ways in which
the marketing order could be used to address this situation. After much
debate, the Committee recommended the use of volume regulation (in the
form of producer allotments) during the 2000-01 season for the first
time in over 30 years.
Based on industry experience during the 2000-01 season, the
Committee recommended late last year to change some provisions of the
order's rules and regulations pertaining to the producer allotment
program. This was done to prepare for the possibility that volume
regulation would be needed again in the 2001-02 season. The changes
recommended were to modify the way in which growers' sales histories
are calculated, clarify the fresh fruit exemption, modify the outlets
for excess cranberries, and reinstate the June 1 allotment notification
date. These changes were proposed in a rule published in the Federal
Register on January 12, 2001 [66 FR 2838]. Comments on that proposed
rule were due on February 12, 2001.
Subsequently, in a meeting held March 4-5, 2001, the Committee
recommended establishing a marketable quantity of 4.7 million barrels
and an allotment percentage of 67 percent for the 2001-02 season (with
an exemption for fresh and organically-grown fruit). At that meeting,
the Committee also recommended a further revision in the way sales
histories are calculated, establishing a deadline for transfers of
sales histories, and streamlining the sales history appeals procedure.
These recommendations were included in a proposed rule published in the
Federal Register on May 14, 2001 [66 FR 24291]. Also included in that
rule were alternative proposals to establish a marketable quantity of 4
million barrels with an allotment percentage of 54 percent and no
exemptions for fresh or organically-grown fruit; and to establish no
volume restrictions for the upcoming season. In that rule, the
Department also proposed withdrawing the reinstatement of the June 1
allotment notification date. Comments on the second proposed rule were
due May 29, 2001.
This rule finalizes the actions proposed in both the January 12 and
May 14 proposed rules.
History of the Marketing Order
The cranberry industry has operated under a Federal marketing order
since 1962. The order's primary regulatory authority is volume
regulation. At that time, production was trending sharply upward, due
primarily to improving yields, and demand was not keeping pace. The
intent of the program was to limit the volume of cranberries available
for marketing in fresh market outlets in the United States and Canada,
and in all processing outlets, to a quantity reasonably in balance with
the demand in such outlets. This method of controlling volume was the
``withholding'' provisions whereby ``free'' and ``restricted''
percentages would be established. Growers would deliver all contracted
cranberries to their respective handlers. Free cranberries could be
marketed by handlers in any outlet, while restricted berries would have
to be withheld from handling and, if possible, diverted by handlers to
noncompetitive markets. The withholding program has not been used since
1971.
The order was amended in 1968 to authorize another form of volume
regulation--producer allotments. The intent was to discourage new
plantings and allow growers to remove surplus berries in a more
economical manner, by reducing their production to approximate the
marketable quantity or by leaving excess berries unharvested.
Production had continued to increase, and the industry was
reluctant to recommend a sufficient restricted percentage under the
withholding regulations. Under the producer allotment program, growers
were issued base quantities. Base quantity was the quantity of
cranberries equal to a grower's established cranberry acreage
multiplied by such grower's average per acre sales made from the
acreage during a representative period. If the allotment base program
were activated, each handler would be allowed to acquire for normal
marketing only a certain
[[Page 34334]]
percentage of each grower's base quantity. This authority was used to
establish a regulation for the 1977-78 season, but that regulation was
subsequently rescinded.
In 1992, the producer allotment provisions were amended to change
the method of calculating growers' annual allotments from the base
quantity method to a sales history method. Under this amendment, a
grower's sales history is calculated based on a grower's actual sales,
expressed as an average of the best 4 of the previous 6 years of sales.
There were concerns that base quantities did not accurately reflect
actual levels of sales because as growers' acreage increased or
decreased, the base quantity did not change. It was concluded that
basing allotments on actual sales off acreage would be a more realistic
and practical way to determine annual allotments. These provisions were
first used in the 2000-2001 season.
Producer Allotment Order Provisions
Section 929.49 of the order currently provides that if the
Secretary finds from the recommendation of the Committee or from other
available information, that limiting the quantity of cranberries
purchased from or handled on behalf of growers during a crop year would
tend to effectuate the declared policy of the Act, the Secretary shall
determine and establish a marketable quantity for that year. In
addition, the Secretary would establish an allotment percentage which
shall equal the marketable quantity divided by the total of all
growers' sales histories. The allotment percentage would be applied to
each grower's individual sales history to derive each grower's annual
allotment. Handlers cannot handle cranberries unless they are covered
by a grower's annual allotment.
Section 929.48 of the order provides for computing growers' sales
histories. Sales history is defined in Sec. 929.13 as the number of
barrels of cranberries established for a grower by the Committee. The
Committee updates growers' sales histories each season. The Committee
accomplishes this by using information submitted by the grower on a
production and eligibility report filed with the Committee. The order
sets forth that a grower's sales history is established by computing an
average of the best 4 years' sales out of the last 6 years' sales for
those growers with existing acreage. For growers with 4 years or less
of commercial sales history, the sales history would be calculated
(prior to the 2000-01 volume regulation) by averaging all available
years of such grower's sales. A new sales history for a grower with no
sales history is calculated by using the State average yield per acre
or the total estimated commercial sales, whichever is greater. This
section also provides the authority for calculating new sales histories
for growers after each crop year where a volume regulation was
established using a formula recommended by the Committee and approved
by the Secretary.
Section 929.49 provides that the Committee must notify each grower
of his or her annual allotment, and must notify each handler of the
annual allotment that can be handled for each grower whose total crop
will be delivered to such handler. In cases where a grower delivers to
more than one handler, the annual allotment will be apportioned among
those handlers.
The order provides for the transfer of any unused grower allotment
to the grower's handler(s). The handlers are then required to equitably
allocate the unused allotment to growers with excess cranberries (those
not covered by allotment) who deliver to those handlers. Unused
allotment remaining after all such transfers have taken place are
transferred to the Committee.
Handlers who receive more cranberries than are covered by their
growers' annual allotments have excess cranberries. The Committee is
required to equitably distribute any unused allotment it receives to
those handlers who have excess cranberries.
Section 929.59 defines excess cranberries as cranberries withheld
by handlers after all unused allotment has been allocated. This
provision also provides for handlers to notify the Committee by January
1 of a written plan to dispose of excess cranberries and to dispose of
them by March 1. Section 929.61 of the order provides the authority for
establishing outlets for excess cranberries.
Section 929.58 of the order provides for relieving from any or all
requirements of the order the handling of cranberries in such minimum
quantities as the Committee, with the approval of the Secretary, may
prescribe. The exemption for fresh and organically-grown cranberries
was implemented in 2000 under the authority in this section.
Marketable Quantity, Allotment Percentage and Sales Histories
Section 929.46 of the order requires the Committee to develop a
marketing policy each year prior to May 1. In its marketing policy, the
Committee projects expected supply and market conditions for the
upcoming season, including an estimate of the marketable quantity
(defined as the number of pounds of cranberries needed to meet total
market demand and to provide for an adequate carryover into the next
season).
The Committee's Marketing Policy for the 2001 Crop
At its February 2001 meeting, the Committee estimated 2001-2002
domestic production of cranberries at 5,675,000 barrels. Carryin as of
September 1, 2001, was estimated at 3,325,000 barrels. Foreign
production (primarily Canada) was projected at 835,000 barrels.
Allowing for shrinkage of approximately 2 percent on carryin and 4
percent on production (327,000 barrels), the total adjusted available
supply of cranberries was expected to be 9,508,000 barrels. Based in
large part on historical sales figures, the Committee estimated
utilization of processing fruit at 5,198,000 barrels and of fresh fruit
at 310,000 barrels. The carryout as of August 31, 2002, was projected
to be 4 million barrels.
A summary of the marketing policy follows:
Cranberry Marketing Policy
[2001 crop year estimates]
------------------------------------------------------------------------
Barrels
------------------------------------------------------------------------
Carryin as of 9/1/2001.................................. 3,325,000
Domestic production..................................... 5,675,000
Foreign production...................................... 835,000
Available supply (sum of the above)..................... 9,835,000
Minus shrinkage......................................... 327,000
Adjusted Supply......................................... 9,508,000
Fresh Fruit............................................. 310,000
Processing fruit........................................ 5,198,000
Total Sales and Usage................................... 5,508,000
Carryout as of 8/31/2002................................ 4,000,000
------------------------------------------------------------------------
The industry was expected to enter the 2001-2002 crop year with
inventories of about 3,325,000 barrels (assuming USDA purchases of 1.0
million barrels). This level of inventory, coupled with the industry's
current capacity to produce in excess of estimated demand, resulted in
the industry debating two volume regulation levels for the 2001-2002
crop year. These alternatives are discussed below.
Summary of Options
The rule published on May 14, 2001, proposed three options of
volume regulation. The first option was recommended by the Committee to
establish a marketable quantity of 4.7 million barrels and an allotment
percentage of 67 percent. This percentage would be applicable to
processed sales only since fresh fruit
[[Page 34335]]
and organically grown cranberries would be exempt.
The second option was recommended by a volume regulation
subcommittee and supported by a number of mostly independent growers.
This option would establish a marketable quantity of 4.0 million
barrels and an allotment percentage of 54 percent. This percentage
would be applied to all sales of cranberries.
Finally, a third option proposed by USDA would establish no volume
regulation for the upcoming season. Cranberry growers and handlers
would voluntarily and individually decide how much fruit to market.
Volume Regulation for the 2001-2002 Season
The Committee met on February 5, 2001, to discuss implementing a
volume regulation to restrict the marketing of the 2001 cranberry crop.
The Committee established a subcommittee to consider volume regulation
alternatives to help the industry overcome its oversupply situation.
Since 1996, cranberry production has been greater than demand by
increasing margins. Large carryover inventories and higher production
yields have resulted in a market burdened by large supplies and low
grower prices. Grower returns have fallen 73 percent from 1997 to 2000,
dropping from $65.90 to $15-20 per barrel.
During the 1999 crop year, production totaled 6.34 million barrels,
a 17 percent increase over 1998. Market demand has not kept up with
growing production, resulting in mounting carryover inventories.
The subcommittee, comprised of independent and cooperative growers,
and a representative of the public, explored various options for
helping to stabilize market supply and demand conditions in 2001-02.
After analyzing various alternatives, the subcommittee decided to
recommend the establishment of a marketable quantity of 4.0 million
barrels applicable to all sales. The public representative on the
subcommittee developed an econometric model showing that a marketable
quantity of 4.0 million barrels would eliminate excess inventories in a
single year and bring grower prices closer to the cost of production. A
marketable quantity at this level would permit growers to deliver an
estimated 54 percent of their sales history to handlers, keeping
approximately 46 percent of their sales history off the market.
The econometric model shows that grower prices would increase to
$31 per barrel. Under this scenario, inventories would decline to 2.325
million barrels. The estimated average cost of production is $35 per
barrel, although the range in individual costs is quite broad, being as
low as $15 and as high as $45 per barrel.
The subcommittee presented its recommendation to the full Committee
at a March 4-5, 2001, meeting. At that meeting, the full Committee
discussed the 4.0 million barrel marketable quantity. The Committee
indicated that it was supportive of improving grower returns and
reducing excessive inventories. However, it believed that a restriction
this large would be harmful to the industry in the long run. The
Committee believes that a more gradual correction in inventory and
grower prices is necessary to allow efforts to expand demand through
the introduction of new products and foreign market development. It
further believes that a substantial price increase in a single season
could result in buyers substituting other commodities for cranberries
in their products.
It is also the Committee's view that the more restrictive level of
regulation could result in a less than desirable carryover into the
2002 season. It is preferable to freeze and store cranberries for
several months after harvest in October before processing them. Sales
for the first 3 months of the season are estimated at about 2.0 million
barrels.
In addition, most independent handlers oppose a regulation of this
magnitude. There is concern that under a 4.0 million barrel marketable
quantity, there would not be enough fruit to fill their needs. If
independent handlers were short of fruit, and not able to meet the
needs of their customers, they could lose market share.
While acknowledging that bringing grower prices to profitable
levels is necessary as soon as possible, the Committee also believes
that it is very important to provide enough fruit for market growth.
The Committee ultimately recommended a marketable quantity of 4.7
million barrels to be implemented through an allotment program that
would permit producers to move about 67 percent of their sales history
to handlers, applied to processed fruit only. This would result in
about 33 percent of sales histories being held off the market as
opposed to approximately 46 percent under the 4.0 million barrel
proposal. Fresh and organic sales would be exempt under this
recommendation and add about 300,000 barrels to the available
marketable supply.
The Committee believes that a 4.7 million barrel marketable
quantity is a sustainable solution to eliminating the surplus, because
it would contribute to reducing supplies in the short term and provide
enough fruit to increase demand in the long term. The Committee
believes that supply reduction and market growth are important to the
long term viability of the industry.
Based upon an initial review of these alternative levels of
regulation, the Department concluded that both could tend to effectuate
the goals of the Act, which are to improve grower prices and establish
more orderly marketing conditions. Additionally, the Department
considered the possibility of having no volume restriction for the
upcoming cranberry season, and allowing growers and handlers to
individually and voluntarily decide how much fruit to market.
Therefore, a proposed rule was issued which solicited comments on both
levels of regulation as well as on the possibility of no regulation.
During the comment period, hundreds of comments were filed by
cranberry growers, handlers and other interested parties. After
analyzing all available information, including that received in
response to the proposed rule, USDA has concluded that a volume
regulation for the 2001-02 crop would be consistent with the purposes
of the Act and the order. In addition, we have concluded that the
regulation likely to provide more benefits to the industry in the short
and long term is that which establishes a marketable quantity of 4.6
million barrels, an allotment percentage of 65, and an exemption for
fresh and organically-grown fruit. The bases for these conclusions are
set forth in detail later in this document.
It should be noted that the allotment percentage of 65 percent
established by this rule is two percent below the 67 percent contained
in the proposed rule. There are two reasons for this. First, the
Department has determined that the marketable quantity recommended by
the Committee should be reduced from 4.7 to 4.6 million barrels. At the
time the Committee made its recommendation, USDA purchases during the
current season (2000-01) were expected to reach 1.0 million barrels. It
currently appears that this level will not be attained, resulting in
more inventories being carried into the 2001-02 season. Estimates of
total purchases to be made have been as low as 500,000 barrels. While
it is not possible to project the exact level of USDA purchases, we
need to be careful not to underestimate the shortfall because it would
result in a lower volume of fruit available for sale in the upcoming
season, which could impede
[[Page 34336]]
market growth efforts. Therefore, we are estimating that USDA purchases
of cranberries will be at least 100,000 barrels below what was
anticipated. For this reason, we are reducing the marketable quantity
for the 2001 crop by that amount.
Additionally, at the time the proposed rule was issued, total sales
histories were estimated at 7.0 million barrels. The current sales
history total is 7.1 million barrels. The allotment percentage equals
the marketable quantity divided by the total sales history. Reducing
the marketable quantity and increasing the sales history total yields a
slightly lower allotment percentage of 65 percent.
Exemption for Fresh and Organically-Grown Fruit
Fresh fruit and organically-grown cranberries are exempt from
regulation this season. Fresh and organically-grown fruit are exempt
pursuant to Sec. 929.58 of the order which provides that the Committee
may relieve from any or all order requirements cranberries in such
minimum quantities as the Committee, with the approval of the
Secretary, may prescribe. The provisions of the regulations concerning
the fresh fruit exemption are also clarified by this action so that
fresh fruit is handled as it was intended by the Committee.
Under current production and marketing practices, there is a
distinction between cranberries for fresh market and those for
processing markets. Cranberries intended for fresh fruit outlets are
grown and harvested differently. Fresh cranberries are dry picked while
cranberries used for processing are water picked. When cranberries are
water picked, the bog is flooded and the cranberries that rise to the
top are harvested. Dry picking is a more labor intensive and expensive
form of harvesting.
Cranberry bogs are designated as ``fresh fruit'' bogs and are grown
and harvested accordingly. Only the lower quality fruit from a fresh
bog goes to processing outlets.
Fresh fruit accounts for less than 6.0 percent of total production.
The Committee estimated that about 310,000 barrels will be sold fresh
this year, compared to 280,000 barrels sold last season. All fresh
cranberries can be marketed and do not compete with processing
cranberries. Fresh cranberries are seasonal (due to their limited shelf
life) and are not a part of the growing industry inventories. The
Committee concluded that fresh supplies do not contribute in any
meaningful way to the current cranberry surplus. Therefore, the
Committee recommended that such cranberries be exempt from the
allotment percentage for this season.
More specific provisions concerning the fresh fruit exemption are
also being adopted under this action so that the intent of the fresh
exemption is clear. The exemption provision specifies that only sales
of packed-out cranberries intended for sale to consumers in fresh form
are exempt from volume regulations. It is further clarified to state
that fresh cranberries are also sold dry (either dry picked or dried
after water picking) in bulk boxes, generally weighing less than 30
pounds. If fresh cranberries are diverted into processing outlets, the
exemption does not apply.
Although the intent of the fresh fruit exemption in the 2000-01
volume regulation was to only exempt cranberries going to retail
outlets as fresh cranberries, questions arose as to what constituted
``fresh'' under the regulations. For example, some growers expressed
the desire to sell large bulk bins of wet cranberries to supermarkets.
There was at least one report in 2000 of bulk wet cranberry sales to a
retail outlet. This is not what was intended by the Committee. The
Committee was concerned that wet cranberries sold in bulk bins would
experience serious quality problems for retailers and consumers and
thus, have a negative impact on the fresh marketplace. Another example
is that some growers wanted to sell their excess cranberries as fresh
cranberries to foreign markets, and it was thought that foreign
customers could have an economic incentive to process the berries and
sell them in direct competition with regulated cranberries in foreign
markets. This also was not the intent of the exemption.
This action also establishes that growers be required to notify the
Committee of their intent to sell fresh fruit in quantities over 300
barrels. It is important for the Committee to collect data on sales of
fresh cranberries. However, it is not intended that small quantities be
subject to reporting requirements.
Organically-grown cranberries comprise an even smaller portion of
the total crop than fresh cranberries. The Committee estimated that
about 1,000 barrels of organic fruit will be sold this season, compared
to 450 barrels last season. Organic cranberries are a growing niche
market and regulating them could have an adverse effect on the
production and marketing of this product. Like fresh cranberries,
demand for organic cranberries is in line with the current limited
production. Thus, organic cranberries do not contribute in any
meaningful way to the current oversupply experienced with processing
fruit. The Committee, therefore, recommended that organically-grown
cranberries be exempt from volume regulation during the upcoming
season.
Organically grown cranberries are exempt from the 2001-2002 volume
regulation. Such cranberries must be certified as organic by a third
party organic certifying organization acceptable to the Committee.
Handlers qualify for the exemptions by filing the amount of fresh and
organic cranberry sales on the grower acquisition listing form.
In addition, fresh and processed fruit sales histories will be
calculated separately by the Committee. This action is discussed in
detail in the following portion of this document relating to sales
history calculations.
Sales History Calculations
This rule modifies the way sales histories are calculated for the
2001-2002 season to apportion the marketable quantity more equitably
among producers.
For growers with 7 or more years of sales history, a new sales
history will be computed using an average of the highest 4 of the most
recent 7 years of sales. For growers with 6 years of sales history, a
new sales history will be computed by averaging the highest 4 of the
most recent 6 years. For growers with 5 years of sales history, a sales
history will computed by averaging the highest 4 of the 5 years.
Additional sales history will be assigned to acreage planted in 1995 or
later in accordance with the following table:
[[Page 34337]]
Table 1.--Additional Sales History Assigned to Acreage
----------------------------------------------------------------------------------------------------------------
Additional
Expected 2001 Average sales 2001 sales
Date planted yield (bbl/ history (bbl/ history per
acre) acre) acre (bbl/
acre)
----------------------------------------------------------------------------------------------------------------
1995............................................................ 275 226 49
1996............................................................ 275 158 117
1997............................................................ 252 95 157
1998............................................................ 222 39 183
1999............................................................ 156 0 156
2000............................................................ 75 0 75
----------------------------------------------------------------------------------------------------------------
For growers whose acreage has 5 years of sales history and was
planted in 1995 or later, the sales history will be computed by
averaging the highest 4 of the 5 years and adjusting in accordance with
Table 1. For growers whose acreage has 4 years of sales history, the
sales history will be computed by averaging all 4 years and adjusting
in accordance with Table 1. For growers whose acreage has 1 to 3 years
of sales history, the sales history will be computed by dividing the
total years' sales by 4 and adjusting in accordance with Table 1.
For growers with acreage with no sales history or for the first
harvest of replanted acres, the sales history will be 75 barrels per
acre for acres planted or replanted in 2000 and first harvested in
2001, and 156 barrels per acre for acres planted or replanted in 1999
and first harvested in 2001.
The Committee discussed equity concerns that resulted when
calculating sales histories during the 2000 volume regulation. Because
sales histories are based on an average of past years' sales, newer
growers could be restricted to a greater extent than more established
growers. This is because a cranberry bog does not reach full capacity
until several years after being planted. Using an average of early
years' sales (which are low) can result in sales histories below future
sales potential. A more established grower, on the other hand, would
have a sales history more reflective of his or her production capacity.
The Committee and the Department gave much thought to the most
equitable method of determining sales histories within the scope of the
order. The final rule on volume regulation for the 2000 crop year was
as flexible as the order would allow in alleviating the differential
impact of the volume regulation on growers.
Section 929.48(a)(3) of the order provides for recalculating the
method for determining sales histories for growers after a crop year
during which a volume regulation has been established using a formula
determined by the Committee with the approval of the Secretary. In
light of this authority, the amendment subcommittee met several times
and developed an improved method of assigning sales histories for newer
acreage in the event volume regulations were implemented for the 2001-
2002 season.
The modified method of calculating sales histories is expected to
address concerns associated with using a grower's actual sales history
without taking into account anticipated production when calculating
annual allotments. Ideally, in a year of volume regulation, all
growers' actual crops would be reduced by the same percentage. Because
of uncertainties in making crop predictions, annual allotment
calculations based on averaging growers' sales histories alone does not
provide any adjustment for new acres as they rapidly increase
production during the first several harvests. Therefore, growers can be
impacted differently depending upon their particular situation. The
result is that sales histories for growers with a significant number of
acres being harvested for the first, second, third, or fourth time can
be below what the average crop for these growers is expected to be
during the next harvest. The restriction percentages for these growers
in a year of volume regulation could therefore exceed the average
allotment restriction percentage. The method being implemented by this
rule addresses that issue by minimizing the differential impact among
growers with newer acreage.
The revised formula provides a specified amount of additional sales
history for newer acreage based on USDA and industry analysis of
cranberry production. The amount of such additional sales history
depends on the year of planting. Also, the formula takes into account
different harvesting times for first year harvests by basing first year
averages on the year planted.
The subcommittee recommended the new method of calculating sales
histories to the full Committee. The Committee recommended this method
at its August 28, 2000, Committee meeting. This recommendation was set
forth in a proposed rule published in the Federal Register on January
12, 2001, (66 FR 2838) with a comment period ending February 12, 2001.
At a Committee meeting on February 5, 2001, concerns were raised
that the proposed formula would give an unfair advantage to growers who
only had acres with 1 to 3 years of sales history (as opposed to
growers with mature acres combined with new or replanted acres). The
Committee believed that these growers would be provided an adjusted
sales history in excess of average yields. The Committee recommended
that the proposal be modified to be more equitable to all growers by
providing that growers with acreage with 1 to 3 years of sales
histories divide their total sales by 4 instead of all available years
and then be provided additional sales history in accordance with the
formula for adjusting sales history.
The Committee's February 5 recommended modification to the sales
history calculations was incorporated into the proposed rule for volume
regulation published in the Federal Register on May 14, 2001 (66 FR
24291).
The revised method of calculating sales histories addresses the
concerns of equity with the way sales histories were assigned under the
2000 volume regulation. The revised formula provides a specified amount
of additional sales history based on USDA and industry analysis of
cranberry production depending upon the year of planting. This formula
provides additional sales histories for acreage planted in 1995 or
later to reflect expected future production on newer or replanted
acreage.
The modification recommended by the Committee in February does not
change the formula that provides the additional sales history. The
additional sales history will still be calculated using the figures in
Table 1. Actual sales
[[Page 34338]]
histories for growers with only 1 to 3 years of sales history (and no
mature acres) will be computed by dividing the total years' sales by 4
before the new acreage adjustment is added, just as every other
grower's sales history is calculated. The formula already compensates
these growers by providing additional sales history as if the grower
also had mature acres and divided the sales history by 4.
Therefore, Sec. 929.149 is modified as follows: For growers whose
acreage has 5 years of sales history and was planted in 1995 or later,
the sales history is computed by averaging the highest 4 of the 5 years
and adjusting in accordance with Table 1; For growers whose acreage has
4 years of sales history, the sales history is computed by averaging
all 4 years and adjusting in accordance with Table 1; For growers whose
acreage has 1 to 3 years of sales history, the sales history is
computed by dividing the total years sales by 4 and adjusting in
accordance with Table 1.
Segregation of Fresh Fruit From Sales History Calculations
Fresh fruit sales will be deducted from sales histories and each
grower's sales history will represent processed sales only. Fresh fruit
was exempt from the 2000-2001 volume regulation and concerns were
raised that sales histories were not reflective of actual sales. The
Committee recommended that if fresh fruit was exempt from volume
regulation, this action be implemented to ensure that sales histories
reflect actual sales. As stated previously in this document, fresh
fruit is again exempted from the 2001-2002 volume regulation.
The Committee recommendation intended that there be separate sales
histories for fresh and processed fruit. The recommendation also
specified that fresh fruit sales may be added to processed fruit sales
history with the approval of the Committee in the event that the
grower's fruit does not qualify as fresh fruit at delivery. The
Committee staff indicated that since fresh fruit was exempt from volume
regulation, it would be administratively easier to simply deduct fresh
sales from each grower's sales history rather than to provide two sales
histories. With the fresh fruit exemption, there is no need for a sales
history for fresh fruit. Also, since there will be no fresh fruit sales
history, there is no need to specify that fresh fruit sales may be
added to processed fruit sales histories. Also, a provision is being
implemented covering growers whose fresh fruit is rejected upon
delivery. The regulatory text has been modified to reflect this change.
Therefore, a new paragraph (e) will be added to Sec. 929.149 specifying
that fresh fruit will be deducted from sales history calculations.
The Committee addressed the impacts of having a sales history that
includes only processed fruit, and how the allotment percentage will be
applied. In the fresh fruit industry, there are instances when growers
deliver fresh fruit that fails the handler's fresh fruit specifications
and therefore is converted to processing fruit. In this case, if a
grower has an inadequate processing fruit allotment to cover the
rejected fruit, the handler can allocate unused allotment from other
growers to cover the excess. Each handler should give priority to these
growers when allocating unused allotment to cover excess cranberries.
This will allow the grower to deliver the rejected fruit for
processing. This action is being implemented by adding a new paragraph
(f) to Sec. 929.149 of the order's rules and regulations.
Section 929.62(c) of the order specifies that handlers must file
certified reports with the Committee as to the quantities of
cranberries handled during designated periods. Handlers have been
reporting this information and would continue to report this
information in accordance with that provision.
Change in Number of Years Used in Computing Sales Histories
Sales histories will be computed using an average of the highest 4
of the most recent 7 years of sales. Paragraph (a)(1) of Sec. 929.48 of
the order sets forth that sales histories are computed using the best 4
out of 6 years of growers' sales. Paragraph (a)(2) of the same section
states that the Committee, with the approval of the Secretary, may
alter the number and identity of years to be used in computing
subsequent sales histories.
At amendment subcommittee meetings and full Committee meetings, the
impact of using the year of volume regulation in future calculations of
sales histories was discussed. The Committee was concerned that sales
off acreage in a year of volume regulation could be unusually low and
if that year was used in calculating sales histories for the next year,
it could lower some growers' sales histories to unrealistic levels.
This change allows the year of volume regulation (2000-01) to be
dropped from sales history calculations. Adding an additional year from
which growers' highest 4 years of sales can be chosen provides a
greater opportunity for growers to maintain a sales history more
reflective of their actual sales.
Paragraph (a) of Sec. 929.149 is modified to indicate that sales
histories will be computed using an average of the highest 4 of the
most recent 7 years of sales.
State Average Yield Provisions
The definition of State average yield is being removed from the
rules and regulations. Section 929.48(a)(5) of the order sets forth
that a new sales history for a grower with no sales history is
calculated by using the State average yield per acre or the total
estimated commercial sales, whichever is greater.
For the 2000-2001 crop year, the State average yield was defined as
the average State yields for the year 1997 or the average of the best 4
years out of the last 6 years, whichever was greater. This calculation
was similar to that used to compute sales history for more established
growers (an average of the best 4 years out of the last 6 years), and
averaged out seasonal variations in yields. However, if estimated
commercial sales were greater than what was computed above, the
Committee used the estimated commercial sales.
The formula for recalculating sales histories being implemented
with this action provides a yield for acres with no sales history based
on analysis of industry data. For acreage expected to be harvested for
the first time in the year of a volume regulation, the sales history
will be 75 barrels for acres harvested the first year after planting
and 156 barrels for acres harvested the second year after planting.
These yields are based on averages of expected yields from acreage of
that age plus an additional 25 barrels and are more in line with actual
yields than providing the State average yield, which is considered high
for first harvests. Under the State average yield provisions for the
2000 volume regulation, growers forfeited any unused allotment. The
modified method provides a simpler, more realistic approach to acreage
with no sales history.
Since, under the new formula, a definition of State average yield
is unnecessary, Sec. 929.148 is removed from the rules and regulations.
Definition of Commercial Crop
The definition of commercial crop is being removed from the rules
and regulations. The final rule on volume regulation for the 2000 crop
changed the number of barrels that defined a commercial crop under the
marketing order from 15 to 50 barrels per acre. Calculations of sales
histories were based on ``commercial'' cranberry sales. Section 929.107
defined commercial crop as acreage that has a sufficient
[[Page 34339]]
density of growing vines to produce at least 50 barrels per acre
without replanting or renovation. Acreage that produced less than 50
barrels per acre was not considered to produce a commercial crop.
The intent of this provision was to assist growers who harvested
cranberries for the first time in 1999. These growers qualified for a
new sales history determination for the 2000 crop year if they produced
less than 50 barrels per acre in 1999.
A full commercial cranberry crop is usually not harvested until 3
or 4 years after being planted. Production is usually limited during
the first year, with increases in subsequent years until full capacity
is reached. This rule change allowed growers who produced less than 50
barrels per acre in 1999, to be eligible to receive as a sales history
the determination for growers with no sales history on such acreage
(which was the State average yield or the grower's estimated commercial
sales, whichever was greater) for the 2000 volume regulation. This
change was intended to benefit growers who had very low yields per acre
for their first year of production.
The new calculation of sales histories being implemented in this
action makes this provision unnecessary. For acreage expected to be
harvested for the first time in 2001, the sales history will be 75
barrels per acre for acres planted in 2000 and 156 barrels per acre for
acres planted in 1999. No determinations are necessary as to how many
barrels were produced on the acreage in previous years.
The Committee will still need to determine that acreage reported as
first coming into production in the year of volume regulation is viable
planted acreage. For example, if a grower reports that 50 acres of
cranberries planted in 1999 are going to be harvested for the first
time in 2001, the Committee needs to verify that this acreage exists
and that the vines are sufficient enough to provide a crop. Since the
definition of commercial crop is no longer necessary, Sec. 929.107,
Basis for determining cranberry acreage, is removed from the rules and
regulations.
Appeal Procedures
The Committee unanimously recommended that the Committee review
step be removed from the sales history appeals process. Currently,
Sec. 929.125 provides that a grower may appeal to an appeals
subcommittee within 30 days of receipt of the Committee's determination
of his/her sales history. If the grower is not satisfied with the
subcommittee's decision, the grower may further appeal to the full
Committee. Such grower must notify the full Committee of his or her
appeal within 15 days after notification of the subcommittee's
decision. The Committee has 15 days to review the appeal. The grower
may further appeal to the Secretary, within 15 days after notification
of the full Committee's findings, if the grower is not satisfied with
the Committee's decision. All decisions by the Secretary are final.
The appeals procedure as described above could take 60 or more days
to complete. Last season, the Committee recommended and the Department
approved, removing the Committee's review from the procedures to
shorten the process. Growers were able to take their appeals directly
to the Secretary for a final decision if they were not satisfied with
the appeals subcommittee's determinations. The Committee recommended
for this season and future seasons that the full Committee review step
of the appeals process described in the rules and regulations be
removed to expedite the process. The appeals subcommittee reviewed over
250 appeals for the 2000-2001 crop year. This required many hours of
meetings and recalculations of appealed sales histories, when
warranted. The Committee determined that the appeal process, absent
Committee review, was efficient and provided the grower with a quicker
response than would have otherwise occurred.
Therefore, the Department concludes that the Committee review of
sales history appeals is not needed and is therefore, being removed
from the appeal procedures.
Transfers of Sales Histories on Leased Acreage
The Committee also unanimously recommended that, during a year of
volume regulation, transfers of sales histories through partial or
total leases of acreage only be recognized by the Committee during the
period January 1 through July 31 of each crop year. The appropriate
paperwork would have to be received in the Committee's office by close
of business on July 31.
Currently, Sec. 929.50 provides that, during a year of regulation,
no transfer or lease of cranberry producing acreage, without
accompanying sales history, shall be recognized until the Committee is
in receipt of a completed transfer or lease form. The Committee has
found through experience last season that many growers were delaying
these adjustments until the busy harvest season. The review and
approval of such transfers required a great deal of time and this
placed an added burden on the Committee's staff, especially during the
busy harvest season. Therefore, the Committee recommended that all
transfers must be received by close of business on July 31 during a
year of volume regulation.
This change is being implemented for the 2001-2002 season, which
begins September 1, 2001. All paperwork for transfers must be received
by the Committee staff by July 31, 2001. This will allow sales
histories to be distributed in a more timely manner and also allow the
Committee to complete the transfers prior to the busy harvest season.
This change is being implemented by adding a new paragraph (d) to
Sec. 929.110 of the order's rules and regulations.
Outlets for Excess Cranberries
This action modifies the provisions on outlets for excess
cranberries to broaden the scope of research and development projects
authorized as outlets for excess cranberries.
The purpose of the producer allotment program is to limit the
amount of the total crop that can be marketed for normal commercial
uses. There is no need to limit the volume of cranberries that may be
marketed in noncommercial or noncompetitive outlets. Thus, in
accordance with Sec. 929.61, handlers are allowed to dispose of excess
cranberries in certain designated noncommercial outlets. That section
of the order provides that noncommercial outlets may include charitable
institutions and research and development projects for market
development purposes. Noncompetitive outlets may include any nonhuman
food use (animal feed) and foreign markets, except Canada. Canada is
excluded because significant sales of cranberries to Canada could
result in transshipment back to the United States of the cranberries
exported there. This could disrupt the U.S. market, contrary to the
intent of the volume regulation. To ensure that excess cranberries
diverted to the specified outlets do not enter normal marketing
channels, certain safeguard provisions are established under
Sec. 929.61. These provisions require handlers to provide documentation
to the Committee to verify that the excess cranberries were actually
used in a noncommercial or noncompetitive outlet. In the case of
nonhuman food use, a handler is required to notify the Committee at
least 48 hours prior to disposition so that the Committee staff will
have sufficient time to be available to observe the disposition of the
cranberries.
[[Page 34340]]
In the final rule establishing the 2000-2001 volume regulation,
Sec. 929.104 specified the noncommercial and noncompetitive outlets for
excess cranberries as: (1) Foreign countries, except Canada; (2)
Charitable institutions; (3) Any nonhuman food use; and (4) Research
and development projects dealing with dehydration, radiation, freeze
drying, or freezing of cranberries, for the development of foreign
markets. This regulation also specified that excess cranberries cannot
be handled, i.e. converted into canned, frozen, or dehydrated
cranberries or other cranberry products by any commercial process.
The amendment subcommittee concluded that the provision regarding
research and development projects was too restrictive and could exclude
some outlets for excess cranberries that could be deemed noncommercial
and noncompetitive. The Committee unanimously recommended to modify
paragraph (a)(4) of Sec. 929.104 to state that any research and
development projects approved by the Committee will be eligible as
outlets for excess cranberries. This will provide more flexibility in
determining if a specific project could be considered noncompetitive or
noncommercial. The Committee will review the activity and make that
determination. Research and development projects will not be limited to
dehydration, radiation, freeze drying, or freezing of cranberries for
the development of foreign markets.
Therefore, Sec. 929.104 is modified to broaden the scope of
research and development projects authorized for excess cranberries.
Allotment Notification Date
This action withdraws the proposed reinstatement of the June 1
deadline for the Committee to notify growers and handlers of their
annual allotments.
The rule of January 12, 2001, proposed reinstating the June 1
deadline for the Committee to notify growers and handlers of their
annual allotments. Section 929.49 of the order provides, that in any
year in which an allotment percentage is established by the Secretary,
the Committee must notify growers of their annual allotment by June 1.
That section also requires the Committee to notify each handler of the
annual allotments for that handler's growers by June 1. The June 1 date
was indefinitely suspended in the final rule establishing a volume
regulation for the 2000-2001 crop year (65 FR 42598) to allow adequate
time for interested parties to comment on the volume regulation
proposal for that season and for the Department to give due
consideration to the comments received and issue a final rule.
The Department has determined that this time is needed again for
this year's volume regulation. Therefore, the proposal to reinstate the
June 1 deadline date is withdrawn.
The Regulatory Flexibility Act and Effects on Small Businesses
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA), the Agricultural Marketing Service (AMS) has considered the
economic impact of this action and alternatives considered on small
entities. The purpose of the RFA is to fit regulatory actions to the
scale of business subject to such actions, in order that small
businesses are not unduly or disproportionately burdened. Marketing
orders issued pursuant to the Act, and rules 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. Accordingly, AMS has prepared
this final regulatory flexibility analysis.
According to the Small Business Administration (13 CFR 121.201)
small handlers are those having annual receipts of less than $5,000,000
and small agricultural producers are defined as those with annual
receipts of less than $500,000. Based on recent years' price and sales
levels, AMS finds that nearly all of the cranberry producers and some
of the handlers are considered small under the SBA definition. Of the
1,100 cranberry growers, between 86 and 95 percent are estimated to
have sales equal to or less than $500,000. Fewer than 60 growers are
estimated to have sales that would have exceeded this threshold in
2000. Thus, the consequences of this final rule will apply almost
exclusively to small entities.
Six handlers handle over 97 percent of the cranberry crop. Using
Committee data on volumes handled, AMS has determined that none of
these handlers qualify as small businesses under SBA's definition. The
remainder of the crop is marketed by about a dozen grower-handlers who
handle their own crops. Dividing the remaining 3 percent of the crop by
these grower-handlers, all would be considered small businesses.
This action makes the following amendments to the regulations under
the cranberry marketing order: (1) Establishes a marketable quantity
and an allotment percentage for cranberries in a 10-State production
area for the crop year from September 1, 2001, through August 31, 2002;
(2) exempts fresh and organically grown cranberries from the volume
regulation; (3) changes the way in which sales histories are
calculated; (4) deletes the Committee review step in the sales history
appeal process; (5) adds a deadline date by which requests for
transfers of sales histories on leased acreage must be filed with the
Committee; (6) broadens the scope of research and development projects
authorized as outlets for excess cranberries; and (7) withdraws a
proposal to reinstate a June 1 allotment notification date. These
actions are designed to establish more orderly marketing conditions for
cranberries, improve grower returns, provide for a more equitable
allocation of the marketable quantity among growers, and improve the
administration of the volume regulation program.
Industry Profile
Cranberries are produced in 10 States, but the vast majority of
farms and production are concentrated in Massachusetts, New Jersey,
Oregon, Washington, and Wisconsin. Massachusetts was the number one
producing State until 1990, when Wisconsin took over the lead. Since
1995, Wisconsin has been the top producing State. Together, both States
account for over 80 percent of cranberry production. Average farm size
for cranberry production is very small. The average across all
producing States is about 33 acres. Wisconsin's average is twice the
U.S. average, at 66.5 acres, and New Jersey averages 83 acres. Average
farm size is below the U.S. average for Massachusetts (25 acres),
Oregon (17 acres) and Washington (14 acres).
Small cranberry growers dominate in all States: 84 percent of
growers in Massachusetts harvest 10,000 or fewer barrels of
cranberries, while another 3.8 percent harvest fewer than 25,000
barrels. In New Jersey, 62 percent of growers harvest less than 10,000
barrels, and 10 percent harvest between 10,000 and 25,000 barrels. More
than half of Wisconsin growers raise less than 10,000 barrels, while
another 29 percent produce between 10,000 and 25,000 barrels. Similar
production patterns exist in Washington and Oregon.
About 94 percent of the cranberry crop is processed, with the
remainder sold as fresh fruit. In the 1950's and early 1960's, fresh
production was considerably higher than it is today, and in many years,
constituted as much as 25 to 50 percent of total production. Fresh
production began to decline in the 1980's, while processed utilization
and output soared as cranberry juice products became popular. Today,
fresh fruit claims only about 5 to 6 percent of total production. Three
of the top five
[[Page 34341]]
States produce cranberries for fresh sales. New Jersey and Oregon
produce fruit for processed products only.
Historical Trends and Near Term Outlook
The cranberry industry has operated under a Federal marketing order
since 1962. For many years, the industry enjoyed increasing demand for
cranberry products, primarily due to the success of cranberry juice-
based drinks. This situation encouraged additional production. Between
1960 and 1999, production increased from 1.34 million barrels (one
barrel equals 100 pounds of cranberries) to a record 6.3 million
barrels. This represents a 370 percent increase from 1960 and a 17-
percent gain from the 1998 crop year. Production in the 2000 crop year
declined to 5.5 million barrels, due to the use of volume control by
the industry and a decrease in yields in some production areas due to
adverse weather conditions during the growing season.
While production capacity continues to rise, demand has leveled
off. Over the past several years, per capita consumption of cranberries
in the United States has averaged 1.69 pounds. Per capita consumption
peaked in 1994 at 1.80 pounds and began trending downward. In 1999, per
capita consumption was 1.68 pounds. Associated with these per capita
consumption figures is the fact that total domestic sales also peaked
in 1994 at 4,692,507 barrels but declined to 4,506,632 barrels in 1999.
In 1998, sales totaled 5.1 million barrels, slightly above the
prior 5-year average. In 1999, sales were 5.5 million barrels, and
sales for 2000 are estimated at 5.9 million barrels. Most of the recent
increase in sales can be attributed to stronger activity in export
markets.
Increased total supplies in excess of demand have resulted in large
inventories. Carryin inventories have grown from 883,773 barrels in
1988 to 3,058,921 barrels in 1999, to 4,273,067 barrels in 2000. From
1988 through 1997, carryin as a percent of production ranged from 21 to
36 percent. However, in 1998, carryin as a percent of production
increased to 40 percent; in 1999 it increased to 49 percent. Carryin
inventory for the 2000 season exceeded 4 million barrels for the first
time in the industry's history. Carryin for the 2001 crop is estimated
at 3.325 million barrels.
When supply outpaces demand, resulting in high levels of carryover
inventories, grower prices can be negatively impacted. Grower prices
rose from $8.83 per barrel in 1960 to a peak level of $65.90 per barrel
in 1996. These rising price levels provided an incentive for producers
to expand planted acres and to increase yields. In recent seasons,
prices have declined dramatically. In 1998, grower prices decreased to
$36.60 per barrel. The returns for the 1999 crop year were $17.70 per
barrel. Returns for the 2000 season are expected to be between $15 and
$20 per barrel. The cost of production ranges from $15 to $45 per
barrel.
Similarly, grower revenues have dropped from a high of $350 million
in 1997 to $112 million in 1999. Grower revenues declined by 68 percent
in just two growing seasons. Grower revenues are expected to be less
than $100 million for the 2000 crop year, potentially the first time
that grower revenues will be less than $100 million since the 1980 crop
year.
Impacts of Volume Control
To help stabilize market supply and demand conditions, volume
regulation was introduced in 2000, marking the first time in 30 years
that such regulation was implemented. A marketable quantity of 5.468
million barrels was established for the 2000-01 season, implemented
through an allotment percentage of 85 percent. This, in addition to a
planned government purchase of up to 1,000,000 barrels, assisted
somewhat in relieving market pressures. Also, yields in parts of the
production area were below normal due to adverse weather during the
growing season.
In an industry such as cranberries, where the product can be stored
for long periods of time, volume control is a method that can be used
to reduce supplies so that they are more in line with market needs.
Large inventories are costly to maintain and, with the outlook for
continued high production levels, these inventories are difficult to
market. Producers may not receive full payment for cranberries
delivered to storage for several years, and storage costs are deducted
from their final payment.
The demand for cranberries is inelastic. A producer allotment
program results in a decrease in supply because producers can only
deliver a certain portion of their past sales history. With an
inelastic demand, a small shift (decrease) in the supply curve results
in relatively large impacts on grower prices. An allotment program
results in increasing grower prices and grower revenues.
The level of unsold inventory, the current capacity to produce in
excess of expected demand, and continuing low grower prices have
resulted in the industry debating various alternatives under their
marketing order.
Level of Volume Restriction for the 2001 Crop
As previously discussed, two levels of volume regulation for the
2001 crop have been widely discussed within the cranberry industry in
recent months and were included in the proposed rule. Also included was
a proposal to have no volume regulation. The Department believed that
both levels of volume regulation could tend to further the goals of the
Act--that is, improve grower returns and establish more orderly
conditions in the cranberry market. One of those levels proposed to
establish a marketable quantity of 4.7 million barrels and an allotment
percentage of 67, with an exemption for fresh and organically-grown
fruit. The second proposed to establish a marketable quantity of 4.0
million barrels and an allotment percentage of 54, applicable to all
fruit.
In its initial analysis of these options, the Department relied in
part upon an econometric model developed by the University of Wisconsin
and widely discussed within the industry to project the impact of each
on grower returns and revenues for the 2001 crop. We looked at both
levels of regulation recommended by the industry, as well as what might
occur with no regulation. In making our projections, we used figures
from the Committee's marketing policy. For example, carryin inventory
was estimated at 3.325 million barrels, domestic production was
estimated at 5.675 million barrels, imports were projected at 0.835
million barrels, and total sales for the 2001-02 crop year were
projected at 5.508 million barrels. We used a figure of 1.8 million
barrels for the desirable carryout into the 2002 crop year. The
following table summarizes our findings.
[[Page 34342]]
Marketable Quantities
[In millions of barrels]
----------------------------------------------------------------------------------------------------------------
4.0 with no 4.7 with a
No volume fresh fruit fresh fruit
control exemption exemption
----------------------------------------------------------------------------------------------------------------
Supply:
Domestic production......................................... 5.675 4.000 5.000
Carryin Inventory........................................... 3.325 3.325 3.325
Imports..................................................... 0.835 0.835 0.835
Shrink...................................................... 0.327 0.327 0.327
-----------------------------------------------
Total Available Supply.................................. 9.508 7.833 8.833
================================================================================================================
Demand:
Processed Domestic and Export Sales......................... 5.198 5.198 5.198
Fresh Fruit................................................. 0.310 0.310 0.310
-----------------------------------------------
Total Sales............................................. 5.508 5.508 5.508
================================================================================================================
Carryout Inventories............................................ 4.000 2.325 3.325
Desirable Carryout.............................................. 1.800 1.800 1.800
Surplus......................................................... 2.200 0.525 1.525
Allotment Percentage............................................ 0 56 66
----------------------------------------------------------------------------------------------------------------
Estimated Price per Barrel...................................... $10.00 $31.00 $19.50
----------------------------------------------------------------------------------------------------------------
Estimated Total Revenue (in millions)........................... $56.750 $124.000 $97.500
----------------------------------------------------------------------------------------------------------------
As shown above, ample supplies are expected to be available during
the upcoming year, and prices will likely continue to fall in 2001
without some form of market intervention. Absent any regulation in
2001, the estimated grower price per barrel is projected to decline to
$10, grower revenue would drop to an estimated $56.75 million, and
ending inventories would grow to 4 million barrels. Heavy inventories
will continue to put downward pressure on grower prices for ensuing
seasons.
The second column of the table shows that a 4.0 million barrel
marketable quantity will result in inventories declining to 2.325
million barrels, and the grower price increasing to an estimated $31
per barrel. Total grower revenue under this option is projected to
reach $124 million. Under this option, sales will have to reach 6.0
million barrels to reach the desirable carry out level of 1.8 million
barrels. A marketable quantity of 4.0 million barrels applicable to
total sales history of an estimated 7.4 million barrels would result in
an allotment percentage of 56 percent.
As shown in the last column, the 4.7 million barrel alternative
will result in carryout inventories remaining at 3.325 million barrels.
The grower price will be an estimated $19.50 per barrel, and revenues
will total $97.5 million. With a marketable quantity of 4.7 million
barrels, sales will have to increase to 6,723,000 barrels to reach the
desirable carry out inventory level of 1.8 million barrels. Under this
option, total growers' sales histories are estimated at 7.1 million
barrels of processed sales. Using the formula established under the
order (4.7 million barrels divided by 7.1 million barrels), the annual
allotment percentage would be 66 percent.
As previously discussed, the Department believes carryin
inventories will be higher than originally projected because USDA
purchases during the 2000-01 crop year are likely to be less than
anticipated. An increase in the carryin level (100,000 barrels) would
be offset by a like reduction in the marketable quantity. Thus, total
available supplies would remain the same as in the above table, and the
impact on grower prices and sales would be as estimated above.
The econometric model provides a framework for estimating the
short-term price impacts of reducing supplies at the grower level.
According to the above table, of the three options presented, the 4.0
million barrel marketable quantity alternative will result in the
highest grower price for the upcoming season, and the lowest level of
carry out inventories.
However, in deciding whether to issue a volume regulation for the
2001 crop, and at what level, other factors need to be considered as
well. In the proposed rule, we solicited comments on all three
alternatives, including the longer range impacts of these alternatives
at the grower, handler and consumer levels. Based on current
information, including the comments received (which are analyzed in the
subsequent portion of this document), we have reached the following
conclusions.
Given the anticipated size of the 2001 cranberry crop in addition
to current inventory levels, volume regulation appears to be the
favorable market stabilization technique over no volume regulation. A
no volume regulation adjustment could easily result in a loss of a
substantial number of smaller to mid-sized cranberry producers, as
market prices without any form of market intervention would remain
below the cost of production until market supply fell to the level of
market demand. In addition to a loss of a profitable return on
commodity production, which is a mainstay for many of the producers
likely to be negatively impacted, investments in land and production
start-up costs would also be lost as much of the potentially affected
acreage has no alternative agricultural uses. Cranberry production is a
key agricultural industry in various regions of the major producing
states, including Wisconsin, Massachusetts, New Jersey, Oregon, and
Washington. Failure of cranberry farms in these regions would have
major implications for the vitality of these economies.
Volume regulation is a market stabilization technique whereby a
portion of annual production is withheld from the market, thereby
reducing the flow of supply to market and improving producer prices.
Depending on the amount of production
[[Page 34343]]
impacted by volume control regulation, short- and long-term effects on
the market vary. Some proponents of volume regulation advocate a more
significant reduction in market supply, indicating that such action
would result in a bigger jump in market prices, a quicker improvement
in grower returns, and a necessary reduction in inventories. In
addition, these advocates intimate that any increases in demand could
be met by drawing down surplus inventories, thereby simultaneously
reducing price-depressing affects of large stocks in a time of ample
production. While this argument may be well grounded in economic
theory, there are many externalities which are not given due attention,
as well as producers' inclinations to increase production as market
prices increase. In other words, too large of a volume control
regulation leaves little margin for unforeseen market events and may
result in misleading market signals to producers as a result of an
overly adjusted price.
A less stringent volume regulation would reduce market supply and
improve market prices while allowing for a more gradual market supply-
demand adjustment. While the short-term affect of a less stringent
volume regulation would result in relatively lower market prices than
with a greater reduction, as described above, prices would likely offer
a greater return than if no volume control existed. A more conservative
approach is also less likely to result in a surge of production
triggered by higher prices and allow for a greater margin of supply to
address any unforeseen market complications in subsequent production
years.
In weighing the relative benefits of differing volume regulation,
it is important to consider impacts on handler competition for product
to fill sale orders, and consumer demand elasticity relative to
fluctuating prices. A more restrictive volume control would result in a
smaller volume of product available to handlers to satisfy sale orders
or promote market growth. Handlers who do not maintain inventories of
cranberries may be unable to effectively compete for supplies, thus
resulting in their inability to fill sale orders and a loss of
business. Such a result would have a negative impact on producers, as
some market outlets (demand) may be lost to substitution of like
products for cranberries. Rapid fluctuations in price could have
similar results, as consumers, especially food manufacturers using
cranberries to enhance processed products, are likely to respond
negatively to market inconsistencies in price as well as supplies. A
more gradual reduction in supply could ease market tensions and allow
suppliers to maintain strong market relations with industry consumers.
Furthermore, while it has been demonstrated that end-market
consumer demand is inelastic to price reductions, demand may decrease
if prices were to rise. In other words, end-market consumers are more
likely to consume less cranberries when prices increase drastically
than they are to consume more when prices drop.
For the above reasons, we conclude that establishing a marketable
quantity of 4.6 million barrels for the 2001-02 cranberry season is the
best course of action. This represents the Committee's recommended
marketable quantity adjusted for the increased carryin due to lower
than anticipated USDA purchases during the current season.
Sales History Recalculations
The amendments to the sales history calculations will benefit a
majority of growers, especially growers who planted some or all of
their acreage in 1995 or later. Specifically, the amendment to the
sales history calculation modifies the way growers' sales histories are
calculated so that the additional sales history provided is more in
line with average acreage yields. The amendment also ensures that
growers with mature acres who also have newer acreage and growers with
only newer acres are treated equitably.
The amendment also provides that the Committee deduct fresh sales
from growers' sales histories. The amendment also provides that sales
histories be computed using an average of the highest 4 of the most
recent 7 years of sales. Changing the total number of years from 6 to 7
allows the year of volume regulation (2000-01) to be dropped from sales
history calculations.
Regarding the 2000 volume regulation, many growers, particularly
those with acreage 4 years old or less, indicated that the method of
sales history calculation placed them at a disadvantage because they
realized more production on their acreage than their sales history
indicated. Approximately 30 percent of all cranberry acreage was
planted in 1995 or later and will be impacted by this amendment. With
the volume of new acres within the industry, this would affect many
growers.
The Committee determined that something needed to be done to
address the concerns associated in the 2000 crop year with growers with
newer acreage. The Committee discussed other alternatives to this
method. One suggestion was to allow growers with newer acreage to add a
percentage of the State average yield to their sales history each year
up to the fourth year. The example presented was that acreage being
harvested for the second time during a year of volume regulation would
receive a sales history that was 25 percent of the State average yield,
a third year harvest would receive 50 percent of State average yield,
and a fourth year harvest would receive 75 percent of State average
yield. Although this method would address some of the problems
experienced last year, it was determined that the method established by
this action is a simpler and more practical method for growers to
obtain the most realistic sales history.
The Committee and the Department gave much thought to the most
equitable method of determining sales histories and the method
established by this action specifically addresses growers' concerns by
providing a more equitable determination of their sales histories. The
method provides additional sales history for growers with newer acres
to account for increased yields for each growing year up to the fifth
year by factoring in appropriate adjustments to reflect rapidly
increasing production during initial harvests. The adjustments are in
the form of additional sales histories based on the year of planting.
As discussed previously, an appeals process is in place for growers
to request a redetermination of their sales histories. For the 2000-
2001 volume regulation, over 250 appeals were received by the appeals
subcommittee (the first level of review for appeals) and these appeals
demonstrated the majority of issues that impacted growers during the
volume regulation. This action provides more growers with realistic
sales histories. Therefore, fewer appeals are likely to be filed. The
appeals subcommittee chairman estimated that over 80 percent of the
appeals filed last year would not have been filed if the Committee was
able to implement this formula for the 2000-01 season.
These changes will have a positive effect on all growers and
handlers because they will result in a more equitable allocation of the
marketable quantity among growers.
Revision in the Appeals Process
Currently, Sec. 929.125 provides a three-tiered appeal procedure
for growers who are dissatisfied with the computation of their sales
history pursuant to Sec. 929.48 of the order. First, a grower may
appeal to an appeals subcommittee. The grower may then further appeal
to the full Committee. Finally, the grower may
[[Page 34344]]
appeal to the Secretary. All decisions by the Secretary are final.
This rule eliminates the full Committee review from the procedure
to shorten the process. Thus, growers can take their appeals directly
to the Secretary for a final decision if they are not satisfied with
the appeals subcommittee's determinations. This change shortens the
appeal process, which should benefit growers who disagree with their
sales history determination. The earlier growers have a final decision,
the more able they are to decide how to adjust to their annual
allotment.
Establishment of a July 31 Deadline for Transfers of Sales History
Currently, Sec. 929.50 provides that, during a year of regulation,
no transfer or lease of cranberry producing acreage, without
accompanying sales history, shall be recognized until the Committee is
in receipt of a completed transfer or lease form. This rule establishes
a July 31 deadline for receipt of such paperwork. This action should
assist in the efficient administration of the program by having
transfers recorded before the busy harvest season without unduly
reducing grower flexibility in transferring acreage and sales
histories.
Outlets for Excess Cranberries
This action modifies paragraph (a)(4) of Sec. 929.104 to provide
that any research and development projects approved by the Committee
are eligible as outlets for excess cranberries. Currently, such
projects are limited to those associated with the development of
foreign markets. This action will have a positive impact on growers and
handlers because it broadens the scope of projects eligible for the use
of excess berries. This could encourage more market development
activities, which could expand the overall cranberry market to the
benefit of the industry as a whole.
Allotment Notification Date
Section 929.49 requires the Committee to notify growers and
handlers of their annual allotments by June 1. This date was suspended
prior to the 2000-01 crop year to allow adequate time to complete the
rulemaking process for that season. The proposal to reinstate the June
1 notification date is withdrawn because USDA has decided that
additional time is again needed this year. While it would be beneficial
to growers to have an earlier notification of their annual allotments,
any hardship incurred by delays should be outweighed by the benefits
expected to be accrued by the use of volume regulation during the 2001-
02 crop year.
Analysis of Comments Pertaining to Volume Restrictions for the 2001
Cranberry Crop
The proposed rule published in the May 14, 2001, Federal Register
solicited comments on three options for restricting the 2001 cranberry
crop. A total of 436 comments were filed during the comment period
which ended May 29, 2001. By far, the majority of comments were filed
by cranberry growers (almost 90 percent of the total). In addition, all
six major cranberry handlers commented, as did the Cranberry Marketing
Committee, several U.S. Congressmen and Senators, the Wisconsin State
Cranberry Growers Association, the New Jersey Department of
Agriculture, two agricultural economists, an industry attorney,
employees of growers and handlers, and other interested parties.
Of the comments filed, 294 favored the 4.7 million barrel
marketable quantity, 59 favored the 4.0 million barrel marketable
quantity, and 72 favored no volume regulation at all for the upcoming
season. The remaining comments generally supported volume regulation
but not either of the specific levels contained in the proposed rule.
Some comments also addressed the issue of whether fresh and
organically-grown fruit should be exempt from any established volume
restriction.
In addition to the 436 timely comments, 64 comments were received
after the comment period ended. These late comments were reviewed and
it was determined that no substantive issues raised by these commenters
that were not already known to the Department or raised by those who
filed in a timely manner and given due consideration. Therefore, even
if these comments were timely filed, the outcome of this final action
would not be changed.
The main arguments raised in the comments are addressed below.
Potential Impact of the Various Options on Grower Returns
As expressed by the large number of comments received, it is widely
accepted that the cranberry industry's current oversupply situation has
caused severe financial hardships for a majority of cranberry
producers. Due to the oversupply's price-deflationary affects, grower
returns have suffered sharp declines, frequently resulting in market-
clearing prices below the cost of production. Since low prices have
plagued the industry for more than two crop years, many growers are now
at the point of facing foreclosure and bankruptcy. A financial lending
institution, commenting on the financial hardships faced by many
cranberry producers, indicated that the U.S. cranberry industry has
lost an estimated $160 to $200 million, cumulatively, in recent growing
seasons.
This comment was supported by many growers, stressing that
immediate action is needed to bring about a market correction and begin
the process of returning growers to financial stability. Absent any
improvement in the current situation, growers will continue to operate
under financial stress and will find it difficult to obtain financing
for their farms. Financial institutions have already had to make
arrangements for loan deferrals for many cranberry growers. Commenters
asserted that if grower prices continue at the levels received during
past seasons ($15 to $20 per barrel estimated for 2000), the result
could be a significant loss of smaller to mid-sized producers.
In addition to producer financial distress, many commenters brought
to light corollary impacts. Cranberry growers maintain a national
average of five acres of open space for every acre of farm. Much of
this acreage is located in States where land is under pressure for
development. Loss of cranberry farms in these areas will carry with it
the loss of open space, which will not be regained.
Communities in which cranberries are grown will also suffer as
local resources will be strained. Cranberry production is a key
agricultural industry in various regions of Wisconsin, Massachusetts,
New Jersey, Oregon, and Washington. Failure of cranberry farms in these
regions would have major implications for the economic vitality of
smaller farming communities. Moreover, a potential loss of these
cranberry growing communities would also represent a loss of long-
standing cranberry heritage in these producing regions.
While divided on which form of volume control would be most
effective, most commenters agreed that some level of volume regulation
is necessary to increase grower returns in the upcoming 2001 season.
Results from independently circulated grower surveys recently conducted
by the cranberry industry also demonstrate an overwhelming support for
some level of volume regulation. The two volume regulation options
considered would limit the supply of marketable cranberries to either
4.0 million or 4.7 million barrels.
Those in favor of the 4.0 million barrel marketable quantity
commented that a volume control at this level would significantly
decrease inventory
[[Page 34345]]
supplies and bolster grower prices to a level close to or above the
cost of production. The cost of production ranges from $15 to $45 per
barrel, depending on the efficiency and economies of scale of the
producer.
An industry economist in favor of a 4.0 million barrel volume
restriction estimated that, based on his calculations, limiting the
marketable quantity to this level would yield a 2001 season-average
price of $25 to $35 per barrel. Moreover, a constant marketable
quantity level of 4.0 million barrels in subsequent years would
gradually elevate prices to over $40 per barrel by 2003 or 2004. Any
increases in demand would be met by drawing down surplus inventories,
thereby simultaneously reducing price-depressing affects of large
stocks. Carryover inventories at this level would be approximately 2.3
million barrels while at the 4.7 million barrel level, carryover
inventory would be in the range of 2.5 to 2.7 million barrels.
It was further argued that, at this level, fewer growers would be
forced to exit the industry because recovery would be achieved more
rapidly than under the alternative 4.7 million barrel scenario. Many
commenters agreed with the assumptions and conclusions made in this
argument and voiced their opinion in favor of a more restrictive
regulation, acknowledging that, while more severe in action, this
approach would result in higher prices faster.
Commenters in favor of the alternative option to the above,
establishing a marketable quantity at 4.7 million barrels, stressed the
need for a more gradual, cautionary return to market stability and
grower profitability. Most commenters supporting this option believe
that a more gradual correction in inventory supplies and grower prices
is necessary rather than the severe cut proposed with the 4.0 million
barrel marketable quantity level. A more conservative approach to
volume regulation would reduce market supply and improve market prices
while allowing for a more gradual market supply-demand adjustment. A
more conservative approach is also less likely to result in a surge of
production triggered by artificially high prices and allow for a
greater margin of supply to address any unforeseen market complications
in subsequent crop years. It is estimated that under the 4.7 million
barrel volume control scenario, 2001-02 grower returns would be
approximately $20 per barrel, as compared to returns of $15 to $20 in
2000. One handler's comment included estimated crop returns of $20 to
$25 per barrel for the 2001 crop, $22 to $30 for the 2002 crop, and
higher returns for the 2003 crop.
A third option considers no volume regulation and would allow
market forces to address market supply and demand imbalances.
Commenters in favor of no regulation stated that this is the only
option that supports fairness to all growers and handlers involved in
the cranberry industry.
As discussed above, while divided on which form of volume control
would be most effective, most commenters agreed that some level of
volume regulation is necessary to increase grower returns in the
upcoming 2001 season. Those in favor of volume control, for the most
part, view no volume regulation as potentially detrimental to the
cranberry industry.
In a separate comment filed in favor of the 4.7 million barrel
marketable quantity limit, another industry economist asserted that
allowing the market forces to correct demand-supply imbalances would
not be effective in the case of cranberries due to the nature of this
industry's crop production cycle and high start-up costs. A supply-
demand adjustment in production of a perennial crop such as cranberries
does not occur as quickly as traditional economic theory would imply,
and others have argued. Moreover, investment in land and bog
preparation represents a significant share of cranberry production
costs that can not be re-captured or transferred to alternate
agriculture crop production. For these reasons, the current conditions
in the cranberry industry strongly justify implementation of some form
of volume control for the 2001-02 season.
Another commenter opposing the option of no volume regulation
stated that prices would be far below production costs if no regulation
were implemented for the 2001-02 season. Marginal acreage would be
driven out of production as less efficient producers and operations of
smaller economies of scale would not be economically able to survive.
Other comments opposing the no volume regulation option claimed
that this approach to market stabilization could easily result in a
loss of a substantial number of smaller to mid-sized cranberry
producers, as market prices without any form of market intervention
would remain below the cost of production until market supply fell to
the level of market demand. In addition to a loss of a profitable
return on commodity production, which is a mainstay for many of the
producers likely to be negatively impacted, investments in land and
production start-up costs would also be lost as much of the potentially
affected acreage has no alternative agricultural uses.
Given the anticipated large size of the 2001 cranberry crop in
addition to currently existing inventory levels, volume regulation is
the preferable market stabilization technique.
Availability of Sufficient Supplies to Support Market Expansion Efforts
As long as production capacity exceeds market demand, the cranberry
industry will continue to be in a surplus situation. An alternative
solution to reducing supply through regulation is to increase demand.
Comments filed to this effect noted that a volume regulation at the 4.7
million barrel level would allow a more gradual correction in prices,
thereby affording market participants the time needed to increase
demand through the introduction of new products and export market
development. These comments also stated that a 4.0 million barrel
marketable quantity limit would result in too drastic, and too
substantial, of an increase in product cost from one season to the
next. They argue that erratic price fluctuations could hinder expansion
efforts and be counterproductive, resulting in a loss of current
customers, as was experienced in 1995.
Citing the 1995 industry price increase, commenters in favor of a
more conservative approach to volume regulation recollected that
industrial customers at that time turned away from using cranberries as
an ingredient, reduced cranberry content in existing products, and
substituted other fruits for baking and cereal applications, as well as
in other processed products. The industry economist cited above further
supported this argument by stating that historical evidence shows that
food manufacturers respond adversely to wide swings in commodity
prices, and especially the inability to source the commodity.
Based on the comments, a large portion of the industry favors some
form of volume control. Commenters in favor of the 4.7 million barrel
marketable quantity limitation stated that it would more easily allow
the development of new products and markets than if supplies were
severely restricted. A commenter asserted that a 4.0 million barrel
marketable quantity would dampen growth of the industry at a time when
the industry cannot afford to cut back on market expansion. Another
commenter added that a handler, who has announced the development of
several new products, could launch new products only if reliable
supplies existed in the industry.
[[Page 34346]]
While recognizing the need for market expansion, commenters
favoring a 4.0 million barrel marketable quantity limit argued that any
short-fall in supplies between handlers could be easily avoided by a
draw-down of product from storage, or a transfer of product between
handlers. Counter to the argument of increased market prices having a
negative impact on sales, those in favor of the 4.0 million barrel
limitation believe it is necessary to expand markets at prices that
will restore profitability to the grower. They do not consider that a
price increase would have a negative impact on sales. Moreover, they
argue that growers cannot afford to develop new markets while selling
at below cost of production.
The Department believes that any long-term solution to the
industry's oversupply situation should include market expansion
efforts, and that volume regulations should be used sparingly. The
higher marketable quantity (4.6 million barrels) is consistent with
this conclusion.
Impact of the Volume Restrictions at the Handler Level
In weighing the relative benefits of differing volume regulation,
it is important to consider impacts on handler competition for product
to fill sale orders.
The majority of handlers commenting, and others commenting on the
handler supply issue, either favored no volume restriction or the more
conservative, 4.7 million barrel marketable quantity option of volume
control. To this effect, one commenter stated that a 4.0 million barrel
marketable quantity would cause a severe reduction in inventories,
which would result in an unreasonable fluctuation in supply and prices.
Even though, in addition to establishing orderly marketing
conditions, a major goal of the Act is to protect the interests of
producers (farmers) and consumers, we also consider the impact of this
regulation on handlers (both large and small). As we have already
stated, in the case of cranberries, volume regulation as a market
stabilization technique appears to be a better choice than a no volume
regulation adjustment. One of the reasons is because market adjustment
could easily result in the loss of a substantial number of smaller to
mid-sized producers. In weighing the relative benefits of the two
levels of volume regulation under consideration, we also considered the
impacts they would have on handlers and product needed to fill sale
orders.
From the comments received, and other available information, it was
apparent that the more restrictive volume control would result in a
smaller volume of product available to handlers to satisfy sale orders
or promote market growth. Therefore, handlers who maintain a less
competitive position in the market might be unable to effectively
compete for supplies, thus resulting in their inability to fill sale
orders and a loss of business.
While the Committee estimates carry-in inventories at 3.325 million
barrels, it has been argued by a number of commenters that these
supplies will be concentrated among only a few of the major handlers.
Control over a potentially limited supply of surplus cranberries could
put smaller, less competitive handlers at a disadvantage. Smaller
handlers would be forced to purchase cranberries at a price set by the
larger handlers holding excess inventory or forego filling their sales
demand. These smaller handlers have also expressed concerns that such a
position of control within the market could be used as a predatory tool
to consolidate market power by the larger handlers.
One handler commented that supply constricting regulation could
result in some handlers turning to low-cost growing regions outside of
the United States in order to obtain supplies. Overall, commenters
opposed to restrictive volume control conveyed that any negative
effects resulting from such regulation (any losses incurred), would be
passed on to their growers.
Those in favor of a more conservative, gradual reduction in supply
state that this approach could ease market tensions regarding price
while allowing suppliers to maintain strong market relations with
industry consumers. Commenters in favor of the 4.7 million barrel
marketable quantity stated that, at this level, cranberries will be
available to those independent handlers who do not have inventories.
Moreover, one handler indicated that the industry is willing to ensure
that independent handlers without inventories have access to an
adequate supply of fruit if a volume regulation is established. It is
common practice within the cranberry industry for handlers lacking
adequate contracted supplies to purchase cranberries from other
handlers. While those in favor of some form of volume control realize
that adequate supply cannot be guaranteed, a marketable quantity of 4.7
million barrels would more likely ensure a stable supply to smaller
handlers.
In addition to the above, commenters raised the issue of USDA
cranberry purchases. Commenters are concerned that USDA may purchase
less than previously expected and, therefore, the marketable quantity
should be adjusted accordingly. A lower level of purchases would result
in a higher carryin, thus making more supplies available than
anticipated. It is not possible to anticipate at this time the exact
number of barrel equivalents that will be purchased by USDA in 2001.
However, we have estimated the shortfall in purchases at 100,000
barrels, and adjusted the marketable quantity accordingly.
Commenters also raised the issue of the establishment of a reserve
pool in future years. The industry has been informed that such a
concept would have to be implemented through the formal rulemaking
process. This pooling mechanism could be used in years of a volume
regulation in order to provide all handlers a supply of cranberries for
their needs. Commenters urged the USDA to move forward on this issue.
The Need for a Prompt Decision
Many commenters were urging USDA to make an immediate decision
regarding the issue of regulation for the upcoming crop. This is
because a volume regulation would be more helpful to growers if they
have time to save production costs. Growers can find ways to reduce
costs throughout the year, however, the optimal time for growers to
reduce the amount of cranberries to be harvested is during the bloom
period. Growers can flood their bogs, which will eliminate the flowers
and therefore the fruit. This can be done fairly inexpensively on most
cranberry farms. Bloom usually occurs in the month of June but varies
with the weather.
Initial Regulatory Flexibility Analysis
One comment, submitted by a law firm, was filed on behalf of
several Massachusetts growers and a handler. The commenter argued that
one major handler has created the surplus and that smaller independent
handlers do not have, and never had, a surplus. It was further argued
that volume control will leave the smaller handlers without adequate
supplies to fill orders. This situation, the commenter argued, is
exacerbated by USDA's refusal to create a reserve pool under the order.
The commenter further argued that imposing volume control would be
disruptive to the market and that USDA's regulatory flexibility
analysis is flawed. Specifically, the commenter disagreed with the
Department's classification of
[[Page 34347]]
some handlers as large businesses and argued that the Department dealt
inadequately with growers in its analysis of the economic impact of
volume control. The commenter concluded that volume control will result
in the destruction of 33 to 44 percent of the crop to maintain prices
which would encourage the importation of foreign cranberries. American
handlers would be forced to seek foreign cranberries or would be forced
to buy from the handlers who caused the surplus.
As we have already explained, in recent years, cranberry production
has exceeded demand which has caused dramatic declines in grower
prices. One of the major goals of the Act and the order is to protect
the interests of growers and consumers. In 2000, the Committee (which
represents the interests of the industry) recommended the use of volume
control to bring supplies more in line with demand. This was the first
time in over 30 years that volume control was imposed. Given the
anticipated size of the 2001 crop, in March of 2001, the Committee
again recommended volume regulation for the coming year. Based on its
analysis of the problems faced by the cranberry growers and handlers,
the comments received in response to the proposed rule, and other
available information, the Department decided that volume regulation
would be preferable to a no volume regulation adjustment as a market
stabilization technique.
In classifying businesses as to size for purposes of the regulatory
flexibility analysis, AMS has used gross annual receipts. The analysis
of the impacts of this rule was based on the premise that it would
apply almost exclusively to small entities (both growers and handlers).
Therefore, even if one of the handlers the commenter mentions were to
be reclassified as to size, the analysis would not change.
The commenter's assertion that USDA refuses to create a reserve
pool disregards the fact that such a mechanism in the order can only be
created through formal rulemaking (through testimony and evidence on
the record). This process is normally initiated by a recommendation to
the Department by members of the industry. The Department has not
indicated that it would not entertain such a recommendation.
Finally, it is clear that the cranberry industry is facing a number
of economic problems, the main ones being oversupply and inelasticity
of demand. We realize that there are numerous ways to go about
resolving some of these. The marketing order with its volume control
provisions is one which the industry has chosen to pursue. The
Department has come to the conclusion (for reasons explained in this
document) that the volume control provisions in this rule should be
implemented in order to stabilize the industry and to bring available
supplies of cranberries closer to market demand.
Based on the Department's analysis of the economics of the
cranberry industry and on the plight faced by many growers and
handlers, it is our view that volume control is necessary and that the
level of control contained in this rule will best tend to effectuate
the purposes of the Act and order.
Exemption for Fresh and Organically-Grown Fruit
The 4.7 million barrel option includes an exemption for fresh and
organically-grown cranberries. The 4.0 million barrel option does not
include a fresh and organically-grown fruit exemption.
Most commenters who favored the 4.0 million barrel marketable
quantity also agreed that there was no need for a fresh or organic
fruit exemption. Those who specifically addressed this issue stated
that such an exemption would create a glut of fresh fruit. Some of this
fruit would be inferior in quality, and its presence would injure
overall demand in the fresh fruit market. No one specifically opposed
an exemption for organically-grown fruit. Some commented that the fresh
fruit exemption last year provided incentives for abuse as some growers
reportedly sold fruit as ``fresh'' that ultimately ended up in
processing channels. Some commenters were also concerned that the
exemption would give an unfair advantage to processors that handle
fresh fruit and their growers. This is because (as occurred last year),
allotments not used by fresh fruit growers (because their fruit was
exempt) could be used to offset any excess cranberries delivered by
processing fruit growers.
Most commenters in favor of a 4.7 million barrel marketable
quantity also supported a fresh and organically-grown fruit exemption.
They stated that fresh and organically-grown fruit does not contribute
in any meaningful way to the current cranberry surplus.
The Department supports an exemption for fresh and organically-
grown cranberries because they do not contribute significantly to the
current cranberry surplus. This conclusion is based on: (1) The
relatively minor portion of total production these cranberries
represent (fresh fruit--less than 6 percent and organically-grown
fruit--about 1,000 barrels); (2) the distinction between fresh market/
organically-grown cranberries and cranberries for processing; (3)
information relative to the production and marketing of fresh and
organic cranberries; and (4) the steps that have been taken to improve
compliance with the exemption and to make the exemption more equitable
among handlers and growers. In addition, continued encouragement for
growth in the fresh and organic markets is consistent with industry
objectives to develop additional markets and expand existing markets.
Analysis of Comments Pertaining to Sales History Calculations and
Other Administrative Rule Changes
A proposed rule was published in the Federal Register on January
12, 2001 (66 FR 2838), to change the way in which sales histories are
calculated (including deducting fresh sales from growers' sales
histories). That rule, among other things, also proposed a
clarification of the fresh fruit exemption and expanding the outlets
available for excess cranberries. Twenty-five comments were filed
during the comment period ending February 12, 2001. Most of those
comments expressed general opinions on the use of volume regulation
under the cranberry marketing order, and did not address the specific
changes in the proposal.
During the comment period of this rule, the Committee met and
recommended a further modification in sales history calculations. This
modification was included in a proposed rule published on May 14, 2001.
Eleven additional comments were received in response to the May 14 rule
relative to amendment of sales history calculations.
Three comments supported the reformulation of sales histories in
general, stating that changes made to the sales history calculations
make them more equitable than last year's calculations. Eight
commenters (including one who commented during both comment periods)
supported amending the sales histories calculations as proposed in the
May 14 rule. Six commenters (one who commented during both comment
periods) did not support the modifications to sales history
calculations. One commenter (who commented during both comment periods)
objected to the modification of sales history calculations as proposed
in the May 14 rule. Three commenters said the January 12 proposal did
not make it clear that replanted acres should be treated the same as
new acres when calculating sales histories. Two
[[Page 34348]]
commenters who supported the recalculation suggested allowing greater
flexibility in the appeals process regarding sales histories.
Seven commenters supported the deduction of fresh fruit sales when
calculating sales histories along with the clarification of the fresh
fruit exemption. One commenter did not support the fresh fruit
clarification. One commenter expressed support for the modifications to
the excess cranberry provision, and one commenter suggested further
modifications of that provision.
Reformulation of Sales History Calculations
The comments in support of the new formula for calculating sales
histories expressed that the new method would be more equitable to
growers, especially newer growers, than the way sales histories were
calculated last year. Regarding modifying the formula to divide all
available years by 4, those in support indicated that this revision
would provide growers with sales histories more in line with actual
expected production from new and replanted acres.
A comment in opposition to the formula expressed that growers with
newly planted acres should not be rewarded for making poor business
decisions. Growers had ample information available and should have
known that production was increasing and sales were not. In addition,
this commenter believed that giving additional sales histories to
compensate these growers is unfair to growers with established acres
who did not increase plantings and did not contribute to the current
surplus.
Another commenter in opposition to the new formula said that
providing newer growers with additional sales histories would encourage
new plantings.
The Department does not agree that new plantings will be encouraged
by implementation of this formula or that growers are being rewarded
for making poor business decisions. The new method of calculating sales
histories is intended to address equity concerns expressed last year
with newer growers being impacted to a greater extent than established
growers. The formula merely compensates growers for anticipated
production on recently planted acres that do not have sales histories
reflective of current production potential. The formula is based on
data from all growing areas, from all sizes of growing operations and
represents a higher than mid range of this data. The new method is an
improved method from last year.
Regarding the comment about established growers being treated
unfairly by this action, the modification contained in the May 14
proposed rule was specifically recommended to ensure that sales
histories for established growers were calculated in the same way as
those for newer growers.
One commenter supported the new formula as proposed in the January
12 rule, but did not support the revision which divides by 4 for all
acreage to obtain an actual sales history prior to being assigned the
adjustment for newer acres. This commenter indicated this change would
again put new growers at a disadvantage, especially those growers with
well managed new acreage with relatively high production. The commenter
suggested that growers who are able, be allowed to segregate sales from
older and newer acreage and divide by the appropriate number of years
to obtain the actual sales history prior to adjusting the acreage with
the formula.
This commenter discussed the methodology to determine average
yields per acre depending upon the year of planting. The data used was
increased by 25 barrels to allow more growers to have satisfactory
sales histories. The commenter believed this methodology was flawed in
that it did not take into account the differences between efficient and
non-efficient growers. This commenter provided examples showing how
this formula would be detrimental. In one example, dividing by the
available number of years of sales history and assigning additional
barrels in accordance with the formula would provide the grower with an
average 373.5 barrels per acre. Using an example with actual production
with a specific percentage increase would give the grower an average of
376.31 barrels per acre. Using the formula as revised by dividing by 4
and assigning additional sales history would provide the grower with an
average 271.75 barrels per acre.
The Committee, along with the amendment subcommittee, gave much
thought to improving the method of calculating sales histories to
minimize the differential impact among growers with newer acreage. The
data used to develop the formula was a result of a Department survey of
average yields per acre depending upon the year of planting. The
averages were adjusted up by 25 barrels per acre to include as many
growers as possible. The survey indicated that the average yield for a
full producing acre was 250 barrels per acre. With the 25 barrel
adjustment, the formula recognizes an acre of full production to be 275
barrels. This amount is consistent with the commenter's example that
computed the sales history by dividing all years by 4 (an average of
271.75 barrels per acre).
The Committee was aware that some growers' yields exceeded the
average. However, if the formula used the highest yields in its
calculations, growers with lower yields would receive sales histories
well above average. This would have raised the total sales histories to
an unrealistic amount which would have reduced the effectiveness of a
volume regulation. It was decided that increasing the yields by 25
barrels over average yields brings more growers into the realm of
realizing satisfactory sales histories without defeating the purpose of
volume regulation. In addition, the simpler formula should result in
fewer growers filing appeals.
Therefore, the Department believes that the sales history
calculations as proposed in the January 12 proposed rule and as
modified in the May 14 rule are appropriate for the 2001 volume
regulation.
Replanted Acres
Three commenters said that the January 12 rule did not make it
clear that replanted acres should be treated the same as new acres when
calculating sales histories. The Department agrees that replanted acres
and new acres should be assigned sales histories in the same manner.
Changes have been made where pertinent in the regulatory text for
clarity.
Appeals of Sales History Calculations
One commenter supported the revised sales history formula, but
suggested that exceptions be authorized under the appeals process for
growers to request higher sales histories than allowed under the
formula. Specifically, growers could be required to submit evidence on
yields from separate acreage to be successful in receiving sales
history above and beyond that allowed under the formula.
Last year, over 250 appeals were received by the appeals
subcommittee (the first level of review for appeals). Many of the
appeals were filed by growers who provided credible evidence to allow
the Committee to segregate sales histories of newer acreage so that
additional sales histories could be provided.
The formula specifies certain amounts of sales histories that will
be assigned to newer acreage. Appeals filed requesting higher sales
histories than authorized under the provisions of the
[[Page 34349]]
reformulation of sales histories provisions will be denied.
One of the intents of the reformulation of sales history
calculations is to eliminate the need for appeals to be filed.
Therefore, fewer appeals should be filed and the appeals process can be
completed in time for growers to know what their sales histories are
well before harvest.
Accordingly, no change is made as a result of this comment.
Deduction of Fresh Sales From Sales History Calculations and
Clarification of the Fresh Fruit Exemption Provision
The commenters who supported the deduction of fresh sales when
calculating sales histories expressed that this change will provide
more fairness in the application of the fresh fruit exemption. One
commenter stated that the fresh fruit exemption should not be supported
unless fresh sales are deducted from a grower's sales history. Another
commenter stated that growers who produce both fresh and processed
fruit realized an advantage last year over growers who produced only
processed fruit. As an example, growers who delivered more than 15
percent of their crop as fresh during the 2000-01 crop year did not
contribute to the crop reduction.
Similar comments were made regarding the clarification of the fresh
fruit exemption provision. One commenter stated that the provision was
abused during the 2000-01 season as some growers allegedly sold
processed fruit as fresh fruit to benefit from the exemption. The
commenters in support of the clarification believe that this change
will help to resolve this issue and ensure compliance with the volume
regulation.
One commenter was concerned about the container requirements for
fresh fruit. Another commenter said that the fresh fruit clarification
will make it difficult for growers to sell their own fruit.
The clarification of the fresh fruit exemption provision is to
ensure that fresh fruit does not make its way into processing outlets.
The refinement of the requirements under the exemption better addresses
the intent of the exemption and will assist in limiting its abuse. The
clarification also allows for exceptions to the container requirement.
Therefore, the Department is implementing the provisions to
subtract fresh sales from growers' sales histories and to clarify the
fresh fruit exemption provisions as proposed in the January 12, 2001,
rule.
Excess Cranberries
One commenter supported the modification to broaden the scope of
research and development projects authorized for excess cranberries.
Another commenter suggested that any outlet using less than 5 percent
of a grower's crop be an authorized ``commercial'' use for excess
cranberries.
Excess cranberries should continue to be limited to
``noncommercial'' and ``noncompetitive'' uses. Any other use would
defeat the purpose of the volume regulation and add potential
incentives for abuse. This comment is denied, and the change to the
excess cranberry provisions shall remain as set forth in the January 12
rule.
Other Alternatives Considered
Withholding Volume Regulation
The marketing order provides for two methods of volume controls,
the producer allotment and the withholding programs. Prior to
recommending a producer allotment program for the 2001-2002 crop, the
Committee also considered the benefits of a withholding program.
Unlike the producer allotment program which allows cultural
practices to be changed at the grower level closer to harvest, growers
deliver all their cranberries to their respective handlers under the
withholding program. The handler is responsible for setting aside
restricted cranberries and ultimately disposing of the cranberries in
authorized noncommercial and noncompetitive outlets. This could result
in a large volume of cranberries being disposed of and perhaps
destroyed. In addition, the withholding provisions require that all
withheld cranberries be inspected by the Federal or Federal-State
Inspection Service, which will add costs. Although the benefits to
growers under a withholding program are that all cranberries can be
delivered to handlers, growers would generally only be paid by their
handlers for unrestricted cranberries. In addition, it would be
expected that costs associated with disposal of withheld cranberries be
deducted from grower returns, further reducing grower revenues. This
could result in grower returns well below cost of production.
As with the 2000-2001 volume regulation, the Committee again
determined that the producer allotment method of volume regulation was
preferable over the withholding method. The producer allotment program
allows for less fruit to be produced and would not require the disposal
of as many cranberries as with the withholding provisions. In addition,
inspections are not required under the producer allotment method, which
is more cost effective and would be simpler to administer. This helps
growers reduce some of the variable costs associated with preparing and
maintaining a bog for production and harvest.
Establishing a Cranberry Marketing Pool Under a Producer Allotment
Program
During discussions of volume regulations, a group of independent
handlers indicated that any volume regulation would not be supported
unless there are some assurances that sufficient supplies of
cranberries will be made available to meet their customer needs. Most
independent handlers claim that they do not have inventories of
cranberries to carry into the new season. Although handler to handler
purchases are a normal business practice (with or without a volume
regulation), a producer allotment restriction increases the need for
handlers to purchase from handlers with inventories to maintain market
share. Some handlers believe this places them in a vulnerable position,
needing more fruit than normal from their competitors.
The marketing order does not contain a mechanism to provide the
assurances some of the independent handlers are seeking. An amendment
subcommittee is working towards amending the order to incorporate a
handler marketing pool, whereby a specified amount of cranberries would
be pooled to allow for handlers with little or no inventories to
purchase cranberries at a price established by the Committee. However,
amending the order in this manner cannot be accomplished prior to the
2001 season.
Using All or Part of Both Methods of Volume Regulation in the Same Year
Also considered by the Committee was utilizing both methods of
volume regulation in the same year. Some growers and handlers believe
that the producer allotment program does not adequately address all the
concerns faced by the different segments of the industry. It was
thought that using the most useful parts of each program would address
a broader range of issues. For example, under the withholding program,
handlers can apply to the Committee for a release of their restricted
cranberries. To receive a release, they have to deposit with the
Committee an amount equal to the fair market value of the cranberries
they want to be released. The fair market value is determined by the
Committee. The Committee uses these funds to
[[Page 34350]]
purchase an equal amount of free cranberries from other handlers and to
dispose of those cranberries. This provision of the withholding program
is referred to as the ``buy-back'' provision.
Some growers and handlers indicated if there were a buy-back
provision under the producer allotment program, the concern of handlers
without inventories having access to fruit would be specifically
addressed. However, there is no authority in the marketing order to use
both methods of volume control concurrently, and buy-back cannot be
used under the producer allotment program. Additionally, the intent of
a producer allotment program is to discourage production at the grower
level so that less fruit is delivered to handlers. Establishing a
``buy-back'' under a producer allotment program is problematic for that
reason. If growers believed that some of their excess fruit could
eventually be ``bought back'', increased production could be
encouraged, defeating the purpose of the program. Also, it is unclear
exactly what amount would be ``bought back''.
Other growers and handlers have indicated that if a producer
allotment and a withholding program were recommended in the same year,
growers would still be encouraged to reduce growing, and handlers would
be in a position to buy-back berries to meet market needs. For example,
if a 20 percent restriction under a producer allotment were recommended
in February for the upcoming season, growers would be encouraged to
reduce production. If a withholding provision were recommended in
August of the same year with a restricted percentage of 10 percent,
handlers would have the opportunity to buy back cranberries to meet
their marketing needs.
Section 929.52 of the order specifies that either a withholding or
a producer allotment program may be implemented during any fiscal
period, not both. Also, further discussion is needed to determine what
problems would be associated with implementing both programs in one
year, if authorized. The amendment subcommittee is considering this
issue with an amendment to the order.
Reporting and Recordkeeping Requirements
As with all Federal marketing order programs, reports and forms
used under the cranberry order are periodically reviewed to reduce
information requirements and duplication by industry and public
sectors.
As previously discussed in the proposed rule published on January
12, 2001, this rule necessitates reconfiguring one form currently
approved by OMB. The form is entitled CMC-AL 1, Growers Notice of
Intent to Produce and Qualify for Annual Allotment. Growers are
required to supply the Committee with information relative to their
cranberry acreage in order to qualify for an annual allotment. The
information includes how many existing and new acres would be producing
cranberries in the following season and who would be handling the
cranberries. The estimated time for 1,285 growers to complete this form
is 20 minutes, once a year, for total annual burden hours of 424.05.
The Committee will reconfigure this form to ensure that information
relative to this rule will be included, particularly the date of
planting of the acreage. The burden hours of the form will not change.
Accordingly, the form does not have to be submitted to OMB.
All of the forms associated with the transfer of sales histories
associated with leases have been previously approved by OMB. There are
also some other reporting and recordkeeping and other compliance
requirements under the marketing order. The reporting and recordkeeping
burdens are necessary for compliance purposes and for developing
statistical data for maintenance of the program. The forms require
information which is readily available from handler records and which
can be provided without data processing equipment or trained
statistical staff. This rule does not change those requirements.
In compliance with Office of Management and Budget (OMB)
regulations (5 CFR Part 1320) which implement the Paperwork Reduction
Act of 1995 (44 U.S.C. Chapter 35), the information collection and
recordkeeping requirements imposed by this order have been previously
approved by OMB and assigned OMB Number 0581-0103.
Opportunity for Public Participation in the Rulemaking Process
The Committee's meetings were widely publicized throughout the
cranberry industry and all interested persons were invited to attend
them and participate in Committee deliberations. Like all Committee
meetings, the February 4 and March 4-5 meetings were public meetings.
Meeting announcements were placed on websites specifically designed for
the cranberry industry, and all interested parties were invited to
attend. All entities, both large and small, were able to express their
views on these issues by attending the meetings or contacting their
Committee representatives about their concerns prior to the meetings.
The Committee itself is composed of eight members, of which seven
members are growers and one represents the public. Also, the Committee
has a number of appointed subcommittees to review certain issues and
make recommendations. In addition, several grower meetings were held
throughout the production area to discuss the methods of volume
regulation and the procedures for regulation.
A proposed rule on reformulating the sales history calculations for
the 2001-2002 crop year was published in the Federal Register on
January 12, 2001 (66 FR 2838). A proposed rule on whether to establish
volume regulation was published in the Federal Register on May 14, 2001
(66 FR 24291). The rules were made available on the Department's
website. The rules were also made available through the Internet by the
Office of the Federal Register. A 30-day comment period was provided in
the January 12, 2001, rule, which ended on February 12, 2001. A 15-day
comment period ending May 29, 2001, was provided on the volume
regulation proposal. These comment periods allowed interested persons
to respond to the proposals.
The Department has not identified any relevant Federal rules which
duplicate, overlap or conflict with this rule. A small business guide
on complying with fruit, vegetable, and specialty crop marketing
agreements and orders may be viewed at the following website: 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 recommendations 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.
It is further found that good cause exists for not postponing the
effective date of this rule until 30 days after publication in the
Federal Register (5 U.S.C. 553). The crop year begins on September 1,
2001. This rule should be effective prior to the beginning of the crop
year so that the Committee can initiate its appeals procedures well in
advance of the start of the volume regulation. Also, growers need time
to adjust their cultural practices in preparation for the volume
regulation. Further, handlers and growers are aware of this rule, which
was discussed and
[[Page 34351]]
recommended at public meetings and well-publicized within the cranberry
industry. Also, appropriate public comment periods were provided in the
two proposed rules relevant to this final rule.
List of Subjects in 7 CFR Part 929
Cranberries, Marketing agreements, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, 7 CFR Part 929 is
amended as follows:
PART 929--CRANBERRIES GROWN IN THE STATES OF MASSACHUSETTS, RHODE
ISLAND, CONNECTICUT, NEW JERSEY, WISCONSIN, MICHIGAN, MINNESOTA,
OREGON, WASHINGTON, AND LONG ISLAND IN THE STATE OF NEW YORK
1. The authority citation for 7 CFR Part 929 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
2. Section 929.104 (a)(4) is revised to read as follows:
Sec. 929.104 Outlets for excess cranberries.
(a)* * *
(4) Research and development projects approved by the committee
dealing with the development of foreign and domestic markets,
including, but not limited to dehydration, radiation, freeze drying, or
freezing of cranberries.
* * * * *
Sec. 929.107 [Removed]
3. Section 929.107 is removed.
4. Section 929.110(d) is added to read as follows:
Sec. 929.110 Transfers or sales of cranberry acreage.
* * * * *
(d) During a year of regulation, all transfers of growers' sales
histories for partial or total leases of acreage shall be received in
the Committee office by close of business on July 31.
5. Section 929.125 is revised to read as follows:
Sec. 929.125 Committee review procedures.
Growers may request, and the Committee may grant, a review of
determinations made by the Committee pursuant to section 929.48, in
accordance with the following procedures:
(a) If a grower is dissatisfied with a determination made by the
Committee which affects such grower, the grower may submit to the
Committee within 30 days after receipt of the Committee's determination
of sales history, a request for a review by an appeals subcommittee
composed of two independent and two cooperative representatives, as
well as a public member. Such appeals subcommittee shall be appointed
by the Chairman of the Committee. Such grower may forward with the
request any pertinent material for consideration of such grower's
appeal.
(b) The subcommittee shall review the information submitted by the
grower and render a decision within 30 days of receipt of such appeal.
The subcommittee shall notify the grower of its decision, accompanied
by the reasons for its conclusions and findings.
(c) The grower may further appeal to the Secretary, within 15 days
after notification of the subcommittee's findings, if such grower is
not satisfied with the appeals subcommittee's decision. The Committee
shall forward a file with all pertinent information related to the
grower's appeal. The Secretary shall inform the grower and all
interested parties of the Secretary's decision. All decisions by the
Secretary are final.
Sec. 929.148 [Removed]
6. Section 929.148 is removed.
7. Section 929.149 is revised to read as follows:
Sec. 929.149 Determination of sales history.
A sales history for each grower shall be computed by the Committee
in the following manner.
(a) For each grower with acreage with 7 or more years of sales
history, a new sales history shall be computed using an average of the
highest 4 of the most recent 7 years of sales. If the grower has
acreage with 6 years sales history, a new sales history shall be
computed by averaging the highest 4 of the 6 years. If the grower has
acreage with 5 years of sales history and such acreage was planted
prior to 1995, a new sales history shall be computed by averaging the
highest 4 of the 5 years.
(b) For growers whose acreage has 5 years of sales history and was
planted in 1995 or later, the sales history shall be computed by
averaging the highest 4 of the 5 years and shall be adjusted as
provided in paragraph (d). For growers whose acreage has 4 years of
sales history, the sales history shall be computed by averaging all 4
years and shall be adjusted as provided in paragraph (d). For growers
whose acreage has 1 to 3 years of sales history, the sales history
shall be computed by dividing the total years sales by 4 and shall be
adjusted as provided in paragraph (d).
(c) For growers with acreage with no sales history or for the first
harvest of replanted acres, the sales history will be 75 barrels per
acre for acres planted or re-planted in 2000 and first harvested in
2001 and 156 barrels per acre for acres planted or re-planted in 1999
and first harvested in 2001.
(d) In addition to the sales history computed in accordance with
paragraphs (a) and (b) of this section, additional sales history shall
be assigned to growers with acreage planted in 1995 or later. The
additional sales histories depending on the date the acreage is planted
are shown in Table 1.
Table 1.--Additional Sales History Assigned to Acreage
------------------------------------------------------------------------
Additional
2001 sales
Date planted history per
acre
------------------------------------------------------------------------
1995....................................................... 49
1996....................................................... 117
1997....................................................... 157
1998....................................................... 183
1999....................................................... 156
2000....................................................... 75
------------------------------------------------------------------------
(e) Fresh fruit sales shall be deducted from the sales histories.
The sales history assigned to each grower shall represent processed
sales only.
(f) If a grower's fruit does not qualify as fresh fruit upon
delivery to the handler, and it is converted to processed fruit, the
handler shall give priority to this grower when allocating unused
allotment if the grower does not have sufficient processed sales
history to cover the converted fruit.
8. Section 929.158 is revised to read as follows:
Sec. 929.158 Exemptions.
If fresh and organically-grown cranberries are exempted from the
volume regulation as recommended by the Committee and approved by the
Secretary, the following provisions to these exemptions shall apply:
(a) Sales of packed-out cranberries intended for sales to consumers
in fresh form shall be exempt from volume regulation provisions. Fresh
cranberries are also sold dry in bulk boxes generally weighing less
than 30 pounds. Fresh cranberries intended for retail markets are not
sold wet. If any such fresh cranberries are diverted into processing
outlets, the exemption no longer applies. Growers who intend to handle
fresh fruit shall notify the committee of their intent to sell over 300
barrels of fresh fruit.
[[Page 34352]]
(b) Sales of organically-grown cranberries are exempt from volume
regulation provisions. In order to receive an exemption for organic
cranberry sales, such cranberries must be certified as such by a third
party organic certifying organization acceptable to the committee.
(c) Handlers shall qualify for the exemptions in paragraphs (a) and
(b) of this section by filing the amount of packed-out fresh or organic
cranberry sales on the grower acquisition form.
9. A new Sec. 929.251 is added to read as follows:
Sec. 929.251 Marketable quantity and allotment percentage for the
2001-2002 crop year.
The marketable quantity for the 2001-2002 crop year is set at 4.6
million barrels and the allotment percentage is designated at 65
percent. Fresh and organically grown fruit shall be exempt from the
volume regulation provisions of this section.
Dated: June 22, 2001.
Kenneth C. Clayton,
Acting Administrator, Agricultural Marketing Service.
[FR Doc. 01-16109 Filed 6-22-01; 2:06 pm]
BILLING CODE 3410-02-P