from: http://www.ams.usda.gov/fv/moab.html
[Federal Register: January 12, 2001 (Volume 66, Number 9)] [Proposed Rules] [Page 2838-2850] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr12ja01-23]
Cranberry Marketing Order Notice
To comment on the following notice, click on
the E-mail address located below. USDA requests that your comment contain your
full name and mailing address (street, city, state, zip code). Your
comments must reference the Title and Docket Number:
7 CFR Part 929
[Docket No. FV00-929-7 PR]
If your comments are not able to be transmitted over E-mail, please use the mailing address or the fax number located in the docket.
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 2838]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 929
[Docket No. FV00-929-7 PR]
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; Reformulation of
Sales History Calculations for the 2001-2002 Crop Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
------------------------------------------------------------------------
SUMMARY: This rule invites comments on revisions to the sales history
calculations currently prescribed under the producer allotment
provisions under the cranberry marketing order (order). The order
regulates the handling of cranberries produced in 10 States, and is
administered locally by the Cranberry Marketing Committee (Committee).
This rule would modify the current sales history formula in order to
apportion in the most equitable manner among producers cranberries made
available for disposition by handlers in the event volume regulations
are recommended for the 2001-2002 season. This rule would also clarify
the exemption provisions under the volume regulation provisions for
fresh cranberries, modify the outlets for excess cranberries and
reinstate the dates for the Committee to notify growers and handlers of
their allotments.
DATES: Comments must be received by February 12, 2001.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. Comments must be sent to the Docket Clerk,
Marketing Order Administration Branch, Fruit and Vegetable Programs,
AMS, USDA, room 2525-S, P.O. Box 96456, Washington, DC 20090-6456; Fax:
(202) 720-5698, or E-mail: moab.docketclerk@usda.gov. All comments
should reference the docket number and the date and page number of this
issue of the Federal Register and will be made available for public
inspection in the Office of the Docket Clerk during regular business
hours, or can be viewed at: http://www.ams.usda.gov/fv/moab.html.
FOR FURTHER INFORMATION CONTACT: Kathleen M. Finn or Anne M. Dec,
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) 720-5698.
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) 720-5698, or E-mail: Jay.Guerber@usda.gov.
SUPPLEMENTARY INFORMATION: This proposal is issued under Marketing
Order No. 929, as amended (7 CFR part 929), 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, hereinafter referred to as the
``order.'' 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
What Is the Intent of This Proposal?
Concerns were raised during the 2000-2001 producer allotment volume
regulation period that growers with newer acreage (acreage planted
within the last 5 years) could experience a larger crop reduction than
the average allotment restricted percentage. Existing allotment
percentage calculations are based on averaging growers' sales
histories. Calculation of the sales histories does not factor in
variables and 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 on their
particular situation.
The proposed method in this rule would provide additional sales
history for growers with newer acreage to account for increasing yields
for each year up to the fifth year. A Committee meeting is scheduled
for February 5, 2001, to discuss volume regulation for the 2001-2002
season.
Who Would Be Impacted by This Proposed Rule?
All cranberry growers in the production area who planted acreage in
1995 or later would be impacted by this proposal. In addition to their
actual sales histories, these growers would receive additional sales
history for the newer acreage to account for increasing yields of that
acreage.
For example, a grower with one acre planted in 1998 would have an
actual sales history assigned to that acreage based on average sales
off that acreage. In addition to the actual sales history, the acreage
would be assigned an additional 183 barrels to account for increased
production. A table appears in this document which shows additional
sales history assigned to acreage planted in 1995 or later.
How Were the Additional Sales History Numbers Developed?
The additional sales histories were assigned by using a formula
based on average yields per acre for acreage planted and harvested over
the past 5 years. USDA conducted a survey to determine what average
yields per acre have been.
Using these average yields, an average sales history was calculated
for acreage planted in a specific year. Subtracting the average sales
history from the expected yield from that acreage results in the
additional barrels assigned to that acreage.
What Would Change With the Fresh Fruit Exemption?
The intent of the fresh fruit exemption in the 2000-2001 volume
regulation was to only exempt cranberries going to retail outlets as
fresh cranberries. Questions arose as to what constitutes ``fresh''
cranberries under the regulations.
The Committee developed and recommended a more specific definition
of fresh cranberries so that the intent would be clear for future
volume regulations if fresh cranberries are again recommended for
exemption. This
[[Page 2839]]
proposed rule clarifies that sales of packed-out cranberries intended
for sale to consumers in fresh form would be exempt from volume
regulations. The proposal further clarifies the definition by stating
that fresh cranberries are also sold dry (either dry picked or dried
after water picking) in bulk boxes, generally weighing 30 pounds. If
fresh cranberries are diverted into processing outlets, the exemption
does not apply.
The proposal also recommends that sales histories be calculated
separately for fresh and processed cranberries. Under this proposal, if
fresh fruit is exempt from volume regulation, fresh sales would be
subtracted from a grower's sales history. Whether to exempt fresh
cranberries from a 2001-2002 volume regulation would be discussed and
recommended at the February 5, 2001, Committee meeting if volume
regulations are recommended.
Executive Orders 12866 and 12998
The Department of Agriculture (Department) is issuing this rule in
conformance with Executive Order 12866.
This proposal has been reviewed under Executive Order 12988, Civil
Justice Reform. This rule is not intended to have retroactive effect.
This proposal 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
This proposal invites comments on revisions to the formula for
calculating sales histories under the producer allotment program
currently prescribed under the order. This rule would modify the
current sales history formula to be more equitable to growers in the
event volume regulations are recommended for the 2001-2002 season. This
rule would also clarify the exemption provisions under the volume
regulation provisions for fresh cranberries, modify the outlets for
excess cranberries by broadening the scope of research and development
projects that could be classified as exempt outlets and reinstate the
dates for the Committee to notify growers and handlers of the
allotments. The rule was unanimously recommended by the Committee at a
meeting on August 28, 2000.
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 increasing inventories and reduced grower returns.
In considering ways to cope with the oversupply, the Committee
recommended using volume controls (in the form of producer allotments)
for the 2000-2001 crop year. A final rule establishing a marketable
quantity and allotment percentage was issued on July 3, 2000, and
published in the July 11, 2000, issue of the Federal Register (65 FR
42598) to apply to the 2000-2001 crop year. The final rule also revised
procedures for calculating growers' sales histories, exempted fresh and
organically-grown cranberries from the volume regulation, defined State
average yield per acre, increased the barrels per acre for determining
a commercial crop, revised the Committee review procedures for re-
determination of sales histories, and suspended the date by which the
Committee notifies growers of their annual allotment. These actions
were based primarily upon the recommendations of the Committee and
comments received in response to the proposed rule.
This was the first time the sales history method of the producer
allotment provisions of the order have been used since these provisions
were added to the order in 1992. Many growers, particularly those with
acreage 4 years old or less, have indicated that the current method of
sales history calculation resulted in a much larger crop reduction from
their acreage than the 15 percent reduction established by the July 11,
2000, final rule because of more production on their acreage than their
sales histories indicated.
The order provides that after a year of volume regulation, a new
sales history shall be calculated for each grower using a formula
determined by the Committee (and approved by the Secretary). The
Committee recommendation to revise the formula discussed in this
proposal specifically addresses growers' concerns regarding the most
equitable manner of apportioning among producers the quantities of
cranberries made available for disposition by handlers. This method
would provide additional sales history for growers with newer acreage
to account for increasing yields for each growing year up to the fifth
year.
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 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
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
[[Page 2840]]
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 never used until
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. 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 to be used in calculating allotment percentages under
Sec. 929.49. 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 established by the Committee (and approved
by the Secretary).
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).
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.
2000-2001 Volume Regulation
To address the serious oversupply situation being experienced by
the industry, the Committee recommended volume control for the 2000-
2001 season (September 1, 2000 to August 31, 2001). The Committee
determined that the best method of volume control would be the producer
allotment program, which provides for an annual marketable quantity and
allotment percentage. The final rule establishing the volume regulation
was issued on July 3, 2000, and published in the July 11, 2000, issue
of the Federal Register (65 FR 42598). The marketable quantity for the
2000-2001 crop year was established at 5.468 million barrels.
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 6.432 million barrels. Using the
formula established under the order (5.468 million barrels divided by
6.432 million barrels), the annual allotment percentage was set at 85
percent. Section 929.250 of the regulations set forth the above
mentioned marketable quantity and allotment percentage.
Section 929.104 of the regulations sets forth the noncommercial and
noncompetitive outlets for excess cranberries during a year of volume
regulation. For the 2000-2001 season, the outlets for excess
cranberries are: (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.
Section 929.148 defines State average yield. Section 929.48(a)(5)
sets forth that a sales history for a grower who has no history of
sales associated with such grower's acreage be computed by the
Committee using the total estimated commercial sales from the cranberry
acreage or the State average yield per acre multiplied by the grower's
cranberry producing acreage, whichever is greater. For the 2000-2001
crop year volume regulation, the State average yield was defined as the
yield per State for the year 1997 or the average of the best 4 years
average yield per State out of the last 6 years, whichever is greater.
Section 929.149 sets forth the methods for sales history
determinations for the 2000-2001 year of volume regulation. This
regulation specified that for growers with 5 years of sales history, a
sales history is computed using an average of the highest 4 years of
sales. For growers with 6 or more years of sales history, a sales
history is computed using an average of the highest 4 of the most
recent 6 years of sales. If these growers also have newer acreage with
4 years of sales history or less, and these growers provided the
Committee with credible information which allowed the Committee to
segregate the sales history of the newer acreage, then that acreage is
treated in the same manner as acreage of a grower with 4 years or less
of sales history. For a grower with 4 years or less of sales history,
the sales history is computed using the highest sales season. Sales
history for new acreage with no history of sales (for both new and
existing growers) is computed using the estimated commercial sales or
State average yield, whichever is greater.
Section 929.158 exempts sales of fresh and organically-grown fruit
from the volume regulation. Handlers were required to qualify for the
exemption by filing with the Committee the amount of fresh or organic
cranberry sales on a grower acquisition listing form. In addition, to
receive an exemption for organic cranberry sales, the cranberries must
have been certified by a third party organic certifying organization
acceptable to the Committee.
[[Page 2841]]
Section 929.107 defines ``commercial crop.'' For the 2000-2001
volume regulation, the number of barrels constituting a commercial crop
was increased from 15 to 50 barrels per acre. This change assisted
growers who harvested cranberries for the first time in 1999. These
growers qualified for a new sales history determination if they
produced less than 50 barrels per acre.
Section 929.125 sets forth appeal procedures for growers to request
a redetermination of their sales histories. Growers, dissatisfied with
their sales history determinations, requested a review of the
determinations by following a specified procedure. The grower first
filed the appeal with the appeals subcommittee within 30 days after
receipt of the Committee's determination of sales history. The grower,
if dissatisfied with the subcommittee's decision could further appeal
to the Secretary, whose decision was final.
The way sales histories were calculated for the 2000-2001 crop year
were based on the concerns and comments regarding fairness and equity,
which were raised during the rulemaking proceeding. The revised
procedures for calculating sales histories were expected to result in
an increase in the marketable quantity recommended by the Committee. It
was determined that they were necessary in order to allocate allotment
among growers in the most equitable manner.
Reformulation of Sales History Calculations for the 2001-2002 Crop
Year
The Committee had been discussing the possible use of volume
regulation during the 2000-2001 season for over a year. In its
deliberations, concerns were voiced about the potential inequities that
could result when calculating sales histories. 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.
The marketing order provides for recalculating the method for
determining sales histories, should volume regulation be recommended
for the 2001-2002 season. Specifically, Sec. 929.48(a)(3) states that a
new sales history shall be calculated for each grower after each crop
year during which a volume regulation has been established using a
formula determined by the Committee with the approval of the Secretary.
The amendment subcommittee met several times to develop a better
method of assigning sales histories for newer acreage for future volume
regulations. One method discussed was the British Columbia Marketing
Committee's method of determining sales histories in years of volume
regulation that would add sales history to reflect future production on
newer acres. Conceptually, this method specifically addresses the
situations encountered with newer acres that were experienced this year
domestically. It was suggested by the Committee that this method could
be adopted for future years of volume regulation.
The new method of calculating sales histories is intended to
address problems associated with using a grower's actual sales history
without taking into account anticipated production when calculating
allotment percentages. 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, allotment percentage
calculations are based on averaging growers' sales histories.
Calculation of these sales histories does not factor in variables and
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 on their particular situation. The
result is that sales histories for growers with a significant number of
acres being harvested for the first, second, third, and fourth time can
be well 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 proposed in this rule
addresses that issue by minimizing the differential impact among
growers with newer acreage.
One of the primary concerns associated with the 2000 crop year
volume regulation was that many growers with a combination of both
older and newer acreage were not in a position to take advantage of the
regulation which provides that growers with acreage 4 years old or
younger could use the highest year as his or her sales history. For the
more established grower, all sales from all acreage were combined,
regardless of the age of the acreage. The average of the best 4 years
of sales out of the last 6 years was used as that grower's sales
history. Although the regulations allowed these growers to provide
credible evidence to support yields from newer acres, not all growers
were in a position to do this. The method of calculating sales
histories proposed in this rule would specifically resolve this issue
because the grower would not have to segregate his or her acreage to
receive additional sales history. The grower would merely have to know
the year the acreage was planted and report such information to the
Committee annually. The revised formula in this proposal would provide
a specified amount of additional sales history based on USDA and
industry analysis of cranberry production. The amount of such
additional sales history would depend on the year of planting. This
would provide a direct solution to this issue.
The British Columbia method of calculating sales history is based
on acreage up to 4 years old. Once the acreage reaches its fifth
harvest, the calculation of sales history shifts into a method of
determining sales history using the best 4 out of the most recent 5 or
6 years. Once cranberry acreage reaches full maturity, it is expected
that the average of the best 4 out of 6 years would provide a realistic
history of sales. In discussing these proposed amendments, the
subcommittee was concerned that shifting from the formula for newer
acreage to the mature acreage formula after only 4 years could cause a
dramatic change in calculation of sales histories. Specifically,
growers' sales histories could drop significantly. The subcommittee
determined it would be more equitable to use the newer acreage method
up to 5 years so that the transition into the method of calculating
sales histories based on the best of 4 years for mature acreage would
not cause growers' sales histories to fluctuate significantly.
The first step in developing the method proposed in this rule is to
determine industry wide average yields for acreage based on the year of
planting. These figures would be used in determining additional sales
histories under the new formula. An industry survey conducted several
years ago for crop forecasting estimated average yields for new acreage
to be 80, 130,
[[Page 2842]]
180, and 230 barrels per acre in the first, second, third and fourth
harvests, respectively. The subcommittee was concerned that this data
could be outdated because cultural practices in the industry have
changed and new varieties have been planted which have increased yields
per acre. In addition, there were concerns about differing first year
production between growers who choose to harvest the first year after
planting and those that choose to harvest the second year after
planting. A grower who waits an additional year is doing so in
anticipation of a greater yield. For example, a grower who harvests the
first year after planting may only yield about 50-75 barrels an acre in
the first harvest, where a grower who waits an additional year could
yield about 100-175 barrels per acre in the first harvest. Because
there could be a wide variance in these yields, the subcommittee
believed that developing a single set of averages to simultaneously
accommodate the two scenarios would produce a wide variance and too
much of a differential impact among these growers. The subcommittee
believed these situations should be considered separately to minimize
the differential impact. Therefore, the subcommittee recommended that
the method developed should take into account different harvesting
times by basing the averages on the year planted.
Although there was agreement that this methodology would be the
best course of action for future producer allotment volume regulations,
the subcommittee was still concerned that the actual yield averages may
not be true today. The subcommittee enlisted the help of the Department
in conducting a survey to determine what average yields per acre would
be today.
The Department worked with cranberry handlers in assembling data.
Handlers were asked to provide information on growers' yield per acre
for yearly harvests made 1, 2, 3, 4 and 5 years after planting,
respectively, for acres harvested over the past 5 years. The handlers
were also asked to indicate which varieties were planted, specifying
the proportion of total new acreage dedicated to each variety.
Two large handlers supplied detailed information relative to
harvested acres. To supplement this information, data was gathered from
the numerous appeals filed this year from growers who delivered
cranberries to other handlers. This additional data collection was
accomplished to broaden the scope of the industry data used in the
analysis.
In many cases, it was not possible to determine the varieties of
the cranberries reported. Review of the data indicated that the Stevens
variety was the most prevalent variety, but because the varieties could
not be definitively segregated, no distinction was made in the analysis
regarding variety.
The data combined grower information from all cranberry producing
regions, as well as data for all varieties and years of birth (original
date of planting). The data was analyzed to determine what an average
grower, growing in average conditions, would experience in terms of
yield per acre if he/she planted new acreage and then harvested it 5
consecutive years thereafter.
The results were divided into two categories: Group A--growers
harvesting for the first time 1 year after planting, and Group B--
growers waiting 2 years before the first harvest. The data included the
first harvest and four subsequent harvest yields for groups A and B,
respectively, and was analyzed to determine the average yields and
rates of increase in yields over the first 5 harvests for each grower/
bog category.
The analysis of yield progression over the first 5 harvests for
groups A and B revealed significant differences in first harvest
yields, but supported the conclusion that yield progression rates for
subsequent years were comparable for subsequent harvests. Based on this
observation, yield rates and expected yield/sales histories were
averaged based on the sample size from each group. These averages are
50, 131, 197, 227 and 250 barrels per acre for acres harvested the
first, second, third, fourth and fifth year after planting,
respectively.
Since these numbers are based on average yields for the sample
groups, it is reasonable to conclude that the yields of approximately
50 percent of the growers impacted by this proposal would be higher
than the average. To accommodate as many growers as possible, it was
agreed to adjust the averages upward by 25 barrels which would result
in growers receiving a higher amount of additional sales history under
the proposed formula. This would also assure that first harvests
(acreage with no sales history) which were provided the State average
yield as a sales history in the 2000 crop year would receive a
comparable sales history under this proposal. The average expected
yields for each year, increased by 25 barrels would be 75, 156, 222,
252 and 275 barrels per acre for acres harvested the first, second,
third, fourth and fifth year after planting, respectively.
These yield figures recommended by the subcommittee were
incorporated into the proposed formula for determining the additional
sales history per acre that growers would be provided. This would apply
to acreage planted in 1995 or later. Sales histories for established
acreage would continue to be based on an average of the highest 4
years.
For growers whose acreage has 5 years or less of sales history and
was planted in 1995 or later, the sales history would be computed using
the average of all available years to get actual sales history. In
addition to the actual sales history, such growers would be provided
additional sales history to account for increased production in a year
of volume regulation. The additional sales history would be calculated
using the figures in Table 1.
Table 1.--Additional Sales History Assigned to Acreage
-----------------------------------------------------------------------------------------------------------------
Additional 2001
Date planted Expected 2001 yield Average sales sales history per
(bbl/acre) history (bbl/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
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[[Page 2843]]
The manner in which the additional sales history numbers were
arrived at are as follows. The expected yields per acre in 2001 would
be assigned for each year of planting from 1995 to 2000 (see second
column in Table 1). The average yields per acre established by the
Committee are totaled (depending upon the number of years of
production) and the sum is divided by 4 to obtain an average (see third
column in Table 1--average sales history). Using the years 1995 through
1999, the average yields per acre are 75, 156, 222, 252 and 275. This
average is then subtracted from the expected yield of the acreage in
2001. The difference is the additional sales history for acreage
planted in a specified year (see fourth column in Table 1).
For example, acres planted in 1997 and harvested in 1999 would have
2 years of production (1999 and 2000--first harvest occurring 2 years
after planting). Estimated yields on that acreage, as established by
the Committee, would be 156 and 222 barrels, respectively. These
numbers totaled and divided by 4 equal an average sales history on that
acreage of 95 barrels. Expected yield in 2001 on acreage planted in
1997 is 252 barrels. Subtracting the average from the expected yield
(252 minus 95) results in 157 barrels. This would be the additional
sales history per acre assigned to this acreage, i.e., 157 barrels per
acre would be added to the grower's actual sales history which would be
computed by averaging all available years harvested.
Because yield levels are comparable after the first year of harvest
regardless whether first harvest occurred 1 or 2 years after planting,
the subcommittee opted to base the formula on acres first harvested 2
years after planting. Based on the industry data analyzed,
approximately two-thirds of growers first harvest 2 years after
planting. The formula still takes into account growers who harvest for
the first time 1 or 2 years after planting.
The proposed calculation represents a realistic number of
additional barrels per acre that growers would be provided to account
for increased production on newer acres. The new expected yield/sales
histories are believed to more accurately reflect U.S. grower yields as
the data used represents actual yields for new bogs planted in the
United States over the past 5 years in all parts of the production
area. It is estimated that the data pool represented roughly 60-65
percent of production area growers having newly planted acreage.
Expected yield/sales histories were re-calculated while maintaining the
integrity of first harvest yield differences. Additional sales history
would still be provided to growers based on the age of their acres.
The formula is a tool used to make an appropriate adjustment in
sales histories for growers harvesting young acreage which is not yet
producing at optimal capacity. The formula is based on industry data
collected by USDA. It is important to note that these are only averages
used to determine how much additional sales histories growers would be
provided.
To illustrate how this method would work, a few examples follow:
Example 1--Grower With Only Newer Acreage all First Harvested 2
Years After Planting
A grower has a total of 20 acres with the following sales history:
Actual Deliveries From 1998-2000
-----------------------------------------------------------------------------------------------------------------
Sales (in barrels)
# Acres Planted --------------------------------------- Actual sales history
1998 1999 2000
-----------------------------------------------------------------------------------------------------------------
10............................... 1996 1,000 1,750 1,900
5................................ 1997 ........... 520 1,000
5................................ 1998 ........... ........... 500
----------------------------------------------------
Total........................ ........... 1,000 2,270 3,400
2,223.33 barrels.
-----------------------------------------------------------------------------------------------------------------
The actual sales history for these 20 acres for 2001 would be
2,223.33 barrels (total annual sales divided by all available years, or
3). Because the acreage was planted in 1995 or later, this grower would
receive additional sales history to reflect expected yields on newer
acres in 2001.
In accordance with the formula as set forth in proposed
Sec. 929.149(b) of the regulations, this grower would receive an
additional 117 barrels per acre for acreage planted in 1996 (10 acres
x 117 = 1,170), 157 barrels per acre for the 5 acres planted in 1997
(5 acres x 157 = 785) and 183 barrels per acres for the 5 acres
planted in 1998 (5 acres x 183 = 915 for a total of 2,870 barrels of
additional sales history. Added to the grower's actual sales history,
the total sales history for the year 2001 for this grower's 20 acres
would be 5,093.33 barrels. The only information needed to provide the
additional sales history to this grower would be the date of planting.
Example 2--Grower With Newer Acres With Sales History and New Acres
With No Sales History
A grower has a total of 15 acres with the following sales history:
Actual Deliveries From 1997-2000
---------------------------------------------------------------------------------------------------------------------------------------------------------
Sales (in barrels)
# Acres Planted -------------------------------------------------------- Actual sales history
1997 1998 1999 2000
---------------------------------------------------------------------------------------------------------------------------------------------------------
10............................ 1996 750 1,000 1,800 2,400
5............................. 2000.......................... ............ ............ ............ 0
----------------------------------------------------------------------------------------
Total..................... .............................. 750 1,000 1,800 2,400
1,487.5 barrels
---------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 2844]]
The actual sales history for these 15 acres for 2001 would be
1,487.5 barrels. Because the acreage was planted in 1995 or later, this
grower would receive additional sales history to reflect expected
yields on newer acres in 2001.
In accordance with the formula as set forth in proposed
Sec. 929.149(b) of the regulations, this grower would receive an
additional 117 barrels per acre for acreage planted in 1996 (10 acres
x 117=1,170), 75 barrels for the 5 acres planted in 2000 (5 acres x
75=375) for a total of 1,545 barrels of additional sales history. Added
to the grower's actual sales history, the total sales history for the
year 2001 for this grower's 15 acres would be 3,032.5 barrels. The only
information needed to provide the additional sales history to this
grower would be the date of planting.
Example 3--Grower with established acres and newer acres.
A grower has a total of 60 acres with the following sales history:
Actual Deliveries From 1995-2000
---------------------------------------------------------------------------------------------------------------------------------------------------------
Sales (in barrels) Actual
#Acres Planted --------------------------------------------------------------------------- sales
1995 1996 1997 1998 1999 2000 history
---------------------------------------------------------------------------------------------------------------------------------------------------------
50.................................. 1993......................... 7,500.................. 8,000 6,200 8,800 5,909 8,200
10.................................. 1996......................... ....................... ........ ........ 500 1,800 2,400
----------------------------------------------------------------------------------------------------------
Total........................... ............................. 7,500.................. 8,000 6,200 9,300 7,700 10,600
----------------------------------------------------------------------------------------------------------
Best 4 of 6..................... ............................. ....................... 8,000 ........ 9,300 7,700 10,600 8,900
barrels
---------------------------------------------------------------------------------------------------------------------------------------------------------
The actual sales history for these 60 acres for 2001 would be 8,900
barrels. Because 10 of the acres were planted after 1995, this grower
would receive additional sales history (for these 10 acres) to reflect
expected yields on newer acres in 2001.
In accordance with the formula as set forth in proposed
Sec. 929.149(b) of the order's regulations, this grower would receive
an additional 117 barrels per acre for acreage planted in 1996 (10
acres x 117=1,170) for a total of 1,170 barrels of additional sales
history. Added to the grower's actual sales history, the total sales
history for the year 2001 for this grower's 60 acres would be 10,070
barrels. The only information needed to provide the additional sales
history to this grower would be the date of planting.
The actual production from the 10 newer acres is already included
in past sales history. The 1,170 additional barrels are added to sales
history to account for the increased production from the newer acres
expected in 2001. In this example and in Example 1, the production from
the newer acres was broken out of the total production to illustrate
how the method works. In actual practice, it would not be necessary to
have this information. The only data needed are the dates of planting.
This information would be collected annually by the Committee.
Six years of sales history was used in this example. As discussed
later in this document, the Committee has recommended that growers can
choose the best 4 out of the last 7 crops for 2001 sales history
calculations.
State Average Yield Provisions
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 is 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 is greater. This calculation
is 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
would average out seasonal variations in yields. However, if estimated
commercial sales are greater than what is computed above, the Committee
would use the estimated commercial sales.
To take into account the differences among the States, the
Committee recommended calculating the average yield for each State
using the best 4 of the last 6 years, and comparing it to the average
yield for that State in 1997. The higher of the two figures for each
State was used to calculate new sales histories for new growers. A new
Sec. 929.148 was added to the order's rules and regulations to set
forth this calculation.
The formula for recalculating sales histories set forth in this
proposal 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 would
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 the current system of providing the State average yield,
which is considered high for harvests the first year after planting.
Under the current system, growers forfeit any unused allotment.
However, in actual practice, this forfeiture is difficult to monitor.
The proposed method provides a simpler, more realistic approach to
acreage with no sales history.
Therefore, since under the new formula, a definition of State
average yield is unnecessary, this proposal would remove Sec. 929.148
from the rules and regulations.
Definition of Commercial Crop
The final rule on the volume regulation changed the number of
barrels that defines a commercial crop under the marketing order from
15 to 50 barrels per acre. Calculations of sales histories are based on
``commercial'' cranberry sales. Section 929.107 defines commercial crop
as acreage that has a sufficient density of growing vines to produce at
least 50 barrels per acre without replanting or renovation. Acreage
producing less than 50 barrels per acre will not be 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
[[Page 2845]]
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 is the State average yield or the grower's estimated commercial
sales, whichever is greater). 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 set forth in this proposal
would also make unnecessary the need addressed by Sec. 929.107. For
acreage expected to be harvested for the first time in the year of a
volume regulation, under this proposal, the sales history would be 75
barrels per acre for acres planted in 2000 and 156 barrels per acre for
acres planted in 1999. No determinations would be necessary as to how
many barrels were produced on the acreage in previous years.
The Committee would still need to determine the 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 would need to verify that this acreage
exists and that the vines are sufficient enough to provide a crop.
Since the definition of commercial crop is not necessary if this
proposal is implemented, Sec. 929.107, Basis for determining cranberry
acreage, would be removed from the rules and regulations.
Change in the Number of Years Used in Computing Sales Histories
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 rates.
This proposal is intended to allow the year of volume regulation to
be dropped from future sales history calculations if that year was
unusually low. 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.
Therefore, paragraph (a) of Sec. 929.149 is proposed to be modified
to indicate sales histories shall be computed using an average of the
highest 4 of the most recent 7 years of sales.
Fresh and Organic Fruit Exemption
Fresh and organically-grown fruit are exempt from the 2000-01
volume regulation pursuant to Sec. 929.58 of the order which provides
that the Committee may relieve from any or all requirements cranberries
in such minimum quantities as the Committee, with the approval of the
Secretary, may prescribe. Section 929.158 specifies the exemption for
fresh and organically-grown fruit.
Fresh fruit accounts for about 4.7 percent of the total production.
Organically-grown cranberries comprise an even smaller portion of the
total crop than fresh cranberries, about 1,000 barrels.
Under current 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. When cranberries are water picked for processing, the bog
is flooded, the cranberries are ``reeled off'' the vines with
harvesting equipment designed for water picking that beats the berries
off the vines and the cranberries that rise to the top are harvested.
In the State of Wisconsin, cranberries for fresh market are water
picked but harvested with special equipment designed to remove the
fruit gently as opposed to the reels used to knock fruit from the vines
when processed fruit is harvested. In addition, water picked
cranberries intended for fresh markets are subjected to a drying
process to ensure quality. ``Wet'' cranberries (cranberries that are
water picked and not dried with special drying equipment) are not used
for fresh market retail sales. For these reasons, conversion from a
processed grower to a fresh grower in one season is difficult.
Fresh and organic cranberries are small, but important segments of
the overall cranberry market, and do not currently contribute to the
oversupply situation. Because there is adequate demand for these
products, restricting the volume of fresh cranberries that can be sold
profitably was not recommended for the 2000-2001 volume regulation. It
was discussed at subcommittee and Committee meetings that fresh fruit
production requires special cultural practices that need to be
implemented to transition the cranberry vines from processed fruit
production to fresh fruit production. The exemption for fresh
cranberries was intended to apply to cranberries packed in consumer
packaging, such as cellophane bags for supermarkets. Any cranberries
sorted out from fresh and converted to processing counted against that
grower's allotment.
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 constitutes
``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 was not contrary to the provisions of the 2000
regulation, but it 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 anticipated that foreign
customers could have an economic incentive to process the berries and
sell in direct competition with regulated cranberries in foreign
markets. This also was not the intent of the current regulation.
The subcommittee developed a more specific definition of fresh
cranberries so that the intent would be clear for future volume
regulations if fresh cranberries are again recommended for exemption.
The proposed Sec. 929.158(a) clarifies that sales of packed-out
cranberries intended for sale to consumers in fresh form would be
exempt from volume regulations. The definition is further clarified to
say 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.
The Committee further recommended that growers be required to
notify the Committee of their intent to sell fresh fruit in quantities
over 300 barrels. It is not intended that small quantities be subject
to the regulation. Also, the subcommittee indicated that ``pick-your-
own'' operations would be covered under the fresh fruit exemption.
[[Page 2846]]
No modifications were recommended for organically grown
cranberries. Therefore, organically grown cranberries would be exempt
from future volume regulations if recommended by the Committee (and
approved by the Secretary). Such cranberries would need to be certified
as organic by a third party organic certifying organization acceptable
to the Committee. Handlers would qualify for the exemptions by filing
the amount of fresh and organic cranberry sales on the grower
acquisition listing form.
It was also recommended that a new paragraph (e) be added to
Sec. 929.149 regarding the fresh fruit exemption. This paragraph
proposes that sales histories be calculated separately for fresh and
processed cranberries. This recommendation also would specify that in
the event a grower's fruit does not qualify as fresh fruit, the fresh
fruit sales history, in whole or in part, be added to the processed
fruit sales history with the approval of the Committee. This was
recommended by the Committee so that sales histories would be more
reflective of actual sales, especially if fresh fruit sales are exempt
in the future. 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.
The decision to exempt either fresh or organic cranberries from any
volume regulation would be discussed and recommended by the Committee
at the same time volume regulation is being considered. If fresh or
organic cranberries were not recommended for exemption, these
provisions would not apply.
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 would be required
to notify the Committee at least 48 hours prior to disposition so that
the Committee staff would have sufficient time to be available to
observe the disposition of the cranberries.
In the final rule establishing and implementing 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 discussed 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. At the August 28 Committee meeting, it was
unanimously recommended to modify paragraph (a)(4) of Sec. 929.104 to
state that research and development projects approved by the Committee
would be eligible as outlets for excess cranberries. This would provide
more flexibility in determining if a specific project could be
considered noncompetitive or noncommercial. The Committee would review
the activity and make that determination. Research and development
projects would not have to be limited to dehydration, radiation, freeze
drying, or freezing of cranberries for the development of foreign
markets.
Therefore, this proposal would modify Sec. 929.104 to broaden the
scope of research and development projects authorized for excess
cranberries.
Reinstatement of Allotment Notification Date
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 deadline was suspended in the final rule of the volume
regulation for the 2000-2001 crop year to allow adequate time for
interested parties to comment on the proposed rule and for the
Department to give due consideration to the comments received and issue
a final rule.
This proposal would reinstate the June 1 deadline. It was discussed
at the Committee meeting that it is critical to have a deadline should
volume regulations again be recommended and implemented. The Committee
would even prefer the deadline date to be May 1. However, any other
date would need to be accomplished through formal rulemaking.
Therefore, this rule proposes reinstating the deadline date of June
1 in Sec. 929.49 of the order. If volume regulations are recommended
next year, the Committee intends to make its recommendation at an
earlier date than last year so that growers have the opportunity to
better prepare for the producer allotment program.
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. Accordingly, AMS has prepared this initial regulatory
flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and rules issued thereunder, are unique in that
they are brought about through group action of essentially small
entities acting on their own behalf. Thus, both statutes have small
entity orientation and compatibility.
There are approximately 20 handlers of cranberries who are subject
to regulation under the order and approximately 1,100 producers of
cranberries in the regulated area. Small agricultural service firms are
defined by the Small Business Administration (13
[[Page 2847]]
CFR 121.201) as those having annual receipts of less than $5,000,000,
and small agricultural producers are defined as those having annual
receipts of less than $500,000.
Of the 1,100 cranberry growers, between 86 and 95 percent are
estimated to have sales equal to or less than $500,000. Since 1997, the
industry has seen the value of production decrease by 69 percent. Fewer
than 60 growers are estimated to have had sales in excess of $500,000
in 1999. Thus, the majority of producers of cranberries may be
classified as small entities. The impact of this proposal would apply
to all growers harvesting cranberry acreage in the production area
planted in 1995 or later.
Six major handlers handle over 97 percent of the 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. All of these grower-handlers would be
considered small businesses.
This proposal invites comments on revisions to the formula for
calculating sales histories under the producer allotment program
currently prescribed under the order. This rule would modify the
current sales history formula in order to achieve the most equitable
manner of apportioning among producers cranberries made available for
disposition by handlers in the event volume regulations are recommended
for the 2001-2002 season. This rule would also clarify the exemption
provisions under the volume regulation provisions for fresh
cranberries, modify the outlets for excess cranberries and reinstate
the date for the Committee to notify growers and handlers of the
allotments. The proposal was unanimously recommended by the Committee
at a meeting on August 28, 2000.
The revisions to sales history calculations would benefit a
majority of growers, and would be especially beneficial to newer
growers who planted acreage in 1995 or later. The modification of the
exemption for fresh cranberry sales would clarify the intent of the
exemption already in place. The proposed change to the outlets for
excess cranberries would broaden the scope of the research and
development projects authorized as outlets for excess cranberries. The
reinstatement of the June 1 allotment notification date would only undo
the suspension of that date that was imposed last year when it became
impractical for the Committee to notify growers of their allotments by
that date. In the event volume regulations are implemented next season,
these proposed changes would have a positive effect on all growers and
handlers because they would provide additional allotment to newer
acreage, allow for more options in research and development and
simplify and clarify the present regulations.
Industry Profile
Cranberries are produced in 10 States, but the vast majority of
farms and production is 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. Both States account
for over 80 percent of cranberry production. The industry has operated
under a Federal marketing order since 1962.
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.
Over 90 percent of the cranberry crop is processed, with the
remainder sold as fresh fruit. In the 1950s and early 1960s, fresh
production was considerably higher than it is today, and in many years,
constituted as much as 25-50 percent of total production. Fresh
production began to decline in the 1980s, while processed utilization
and output soared as cranberry juice products became popular. Today,
fresh fruit claims only about 5-6 percent of total production.
(Typically, ``shrinkage'' absorbs the remaining 3 percent of
production.) Three of the top five States produce cranberries for fresh
sales.
Impact of Reformulating Sales History Calculations
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 excess inventories and reduced grower returns.
In considering ways to cope with the oversupply, the Committee
recommended using volume controls (in the form of producer allotments)
for the 2000-2001 crop year. A final rule establishing a marketable
quantity and allotment percentage was issued on July 3, 2000, and
published in the July 11, 2000, issue of the Federal Register (65 FR
42598) to apply to the 2000-2001 crop year.
This is the first time the sales history method of a producer
allotment has been used since these provisions were added to the order
in 1992. Cranberry bearing acres continue to increase. Many growers,
particularly those with acreage 4 years old or less, indicated that the
current method of sales history calculation placed them at a
disadvantage because of more production on their acreage than their
sales histories indicate. It is estimated that approximately 30 percent
of all cranberry acreage was planted in 1995 or later. With the volume
of new acres within the industry, this would affect many growers.
The Committee had been discussing the possible use of volume
regulation for over a year. In its deliberations, concerns were voiced
about the most equitable way of calculating sales histories. Because
sales histories are based on an average of past years' sales, newer
growers would be differently situated than more established growers
when it comes to calculating sales histories. 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 a sales history 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 2000-01 was as flexible
as the order would allow in alleviating the differential impact of the
volume regulation on growers.
After a year of volume regulation, the Committee is provided the
authority to calculate new sales histories for growers. Specifically,
Sec. 929.48(a)(3) sets forth that a new sales history shall be
calculated for each grower after each crop year, during which a volume
regulation has been established, using a
[[Page 2848]]
formula determined by the Committee, with the approval of the
Secretary.
The amendment subcommittee met several times to develop a better
method to assign sales history for newer acreage. They recommended
using a modified version of the British Columbia Marketing Committee's
method of determining sales histories in years of volume regulation.
This method adds sales history to reflect future production on newer
acres. Conceptually, this method addresses the situations encountered
with newer acres that were experienced this year domestically. It was
proposed to adopt this method for future years of volume regulation.
The Committee recommendation to revise the formula would
specifically address growers' concerns by providing a more equitable
determination of their sales histories. The recommended method would
provide additional sales history for growers with newer acreage 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 would be in the
form of additional sales histories based on the year of planting as
shown in the following table.
Table 2.--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
-------------------------------------------------------------------------
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, a fourth
year harvest would receive 75 percent of State average yield. Although
this method would address some of the problems experienced this year,
it was determined that the method proposed would be the simpler and
more practical method for growers to obtain the most realistic sales
history.
The Committee determined that something needed to be done to
address the concerns associated in the 2000 crop year with growers with
newer acreage. As stated previously, an appeals process was established
for growers to request a redetermination of their sales histories. For
the 2000-2001 volume regulation, a total of 247 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. Most of these issues would be addressed
by this proposal. The major categories of appeals were as follows:
1. Growers who provided credible evidence to allow the Committee to
segregate the sales histories of newer acreage so that the sales
histories of the newer acreage could be computed using the highest
sales season. The formula proposed in this rule would provide
additional sales history to these acres without segregating the sales
off these acres. Under this method, their sales histories would more
accurately reflect actual sales.
2. Growers with acreage 4 years old or less that stated that using
the highest sales season still did not provide a realistic sales
history. Under this proposal, these growers would be provided
additional sales history to account for the increases in production of
newer acres.
3. Growers with acreage harvested in 1999 with a sales history much
lower than anticipated yields on the 2000 crop. These growers requested
the Committee to apply the State average yield on this acreage. Under
this proposal, these growers would be provided additional sales history
to account for the increases in production of newer acres. The
additional sales history would be provided based on the year the
acreage was planted.
4. Growers with acreage with no sales history requesting higher
estimated sales than the State average yield. Acreage with no sales
history anticipating first harvest in the year of volume regulation
would receive a sales history based on the year of planting. It is
expected that there will be growers who anticipate higher yields than
the sales history provided by this formula. However, the yield rates
arrived at were based on analysis of industry data and adjusted up 25
barrels to accommodate as many growers as possible.
5. Growers with a variety of issues relating to weather related
damage on acreage, miscalculations of sales histories, etc. It would be
expected appeals of this nature would still be filed and handled on a
case-by-case basis.
If this proposal is finalized and volume regulation is recommended
and implemented next year, the bases for most of the appeals filed in
the 2000 crop year would no longer exist. The appeals subcommittee
chairman estimated that over 80 percent of the appeals filed this year
would not have been filed if the Committee was able to implement this
formula for the 2000-01 season.
As stated previously, fewer than 60 of the approximate 1,100
growers are estimated to have sales in excess of $500,000. Also,
approximately 30 percent of all cranberry acreage was planted in 1995
or later. Since 86 to 95 percent of cranberry growers may be classified
as small businesses, it can be estimated that this proposal would
impact mostly small businesses.
Finally, this proposal, if finalized, would not impose any
immediate regulations on growers or handlers. It only modifies the
formula for calculating sales histories in the event volume regulations
are implemented in the future. Implementing this proposed rule would
benefit small businesses by allowing them more flexibility in receiving
a more equitable sales history if volume regulations are recommended
and implemented in future years. In addition, one of the primary
reasons for this proposal being made at this time is to provide growers
and handlers with advanced notice of the change in calculations to
sales history determinations so that they can be informed and make
decisions well ahead of the future season.
As with all Federal marketing order programs, reports and forms are
periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies. In addition, the
Department has not identified any relevant Federal rules that
duplicate, overlap or conflict with this proposed rule.
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.
There are some reporting and recordkeeping and other compliance
requirements under the marketing order. The reporting and recordkeeping
burdens are necessary for compliance purposes and for the developing
[[Page 2849]]
statistical data for maintenance of the program. The forms require
information that is readily available from handler and grower records
and which can be provided without data processing equipment or trained
statistical staff.
This proposed rule would necessitate 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 burden hours of 424.05. If this
proposed rule is implemented, the Committee would reconfigure this form
to ensure that information relative to this proposal would be included,
particularly the date of planting of the acreage. The burden hours of
the form would not change and the reconfigured form would be submitted
to OMB to replace the current form.
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
the meeting and participate in Committee deliberations on all issues.
Like all Committee meetings, the August 28, 2000, meeting as well as
the amendment subcommittee meetings were public meetings and all
entities, both large and small, were able to express views on this
issue. Finally, interested persons are invited to submit information on
the regulatory and informational impacts of this action on small
businesses.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at: http:/
/www.ams.usda.gov/fv/moab.html. Any questions about the compliance
guide should be sent to Jay Guerber at the previously mentioned address
in the FOR FURTHER INFORMATION CONTACT section.
A 30-day comment period is provided to allow interested persons to
respond to this proposal. Thirty days is deemed appropriate because the
Committee meets in February of 2001, to consider volume regulation. All
written comments timely received will be considered before a final
determination is made on this matter.
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
proposed to be 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.
Sec. 929.49 [Amended]
2. In paragraph (d) of Sec. 929.49, the suspension of the phrase
``On or before June 1'' is removed.
3. In paragraph (e) of Sec. 929.49, the suspension of the phrase
``On or before June 1 of any year in which an allotment percentage is
established by the Secretary'' is removed.
4. Section 929.104, paragraph (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. 929.148 [Removed]
5. Section 929.148 is removed.
6. 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 or less of sales history
and was planted in 1995 or later, the sales history shall be computed
using the average of all available years 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) Sales histories shall be calculated separately for fresh and
processed cranberries. Fresh fruit sales history, in whole or in part,
may be added to process 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.
7. 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.
(b) Sales of organically-grown cranberries are exempt from volume
regulation provisions. In order to
[[Page 2850]]
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.
Dated: January 5, 2001.
Robert C. Keeney,
Deputy Administrator, Fruit and Vegetable Programs.
[FR Doc. 01-949 Filed 1-11-01; 8:45 am]
BILLING CODE 3410-02-P