Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2019-2020 Marketing Year
| Published date | 15 February 2019 |
| Citation | 84 FR 4381 |
| Record Number | 2019-02514 |
| Section | Proposed rules |
| Court | Agricultural Marketing Service |
Federal Register, Volume 84 Issue 32 (Friday, February 15, 2019)
[Federal Register Volume 84, Number 32 (Friday, February 15, 2019)]
[Proposed Rules]
[Pages 4381-4387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02514]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Doc. No. AMS-SC-18-0084; SC19-985-1 PR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2019-2020 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule invites comments on a recommendation from
the Far West Spearmint Oil Administrative Committee (Committee) to
establish salable quantities and producer allotments of Class 1
(Scotch) and Class 3 (Native) spearmint oil produced in Washington,
Idaho, Oregon, and designated parts of Nevada and Utah (the Far West)
for the 2019-2020 marketing year. This proposed rule would also remove
references to past volume regulation no longer in effect.
DATES: Comments must be received by March 18, 2019.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposed rule. Comments must be sent to the Docket
Clerk, Marketing Order and Agreement Division, Specialty Crops Program,
AMS, USDA, 1400 Independence Avenue SW, STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938; or internet: http://www.regulations.gov. Comments should reference the document 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.regulations.gov. All comments submitted in response to this
proposed rule will be included in the record and will be made available
to the public. Please be advised that the identity of the individuals
or entities submitting the comments will be made public on the internet
at the address provided above.
FOR FURTHER INFORMATION CONTACT: Barry Broadbent, Marketing Specialist,
or Gary Olson, Regional Director, Northwest Marketing Field Office,
Marketing Order and Agreement Division, Specialty Crops Program, AMS,
USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or Email:
Barry.Broadbent@usda.gov or GaryD.Olson@usda.gov.
Small businesses may request information on complying with this
regulation by contacting Richard Lower, Marketing Order and Agreement
Division, Specialty Crops Program, AMS, USDA, 1400 Independence Avenue
SW, STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491,
Fax: (202) 720-8938, or Email: Richard.Lower@usda.gov.
SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553,
proposes to amend regulations issued to carry out a marketing order as
defined in 7 CFR 900.2(j). This proposed rule is issued under Marketing
Order No. 985, as amended (7 CFR part 985), regulating the handling of
spearmint oil produced in the Far West. Part 985 (referred to as 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.'' The Committee locally administers the Order and is comprised
of spearmint oil producers operating within the area of production, and
a public member.
The Department of Agriculture (USDA) is issuing this proposed rule
in conformance with Executive Orders 13563 and 13175. This action falls
within a category of regulatory actions that the Office of Management
and Budget (OMB) exempted from Executive Order 12866 review.
Additionally, because this proposed rule does not meet the definition
of a significant regulatory action, it does not trigger the
requirements contained in Executive Order 13771. See OMB's Memorandum
titled ``Interim Guidance Implementing Section 2 of the Executive Order
of January 30, 2017, titled `Reducing Regulation and Controlling
Regulatory Costs' '' (February 2, 2017).
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. This rule is not intended to have retroactive
effect. Under the Order now in effect, salable quantities
[[Page 4382]]
and producer allotment percentages may be established for classes of
spearmint oil produced in the Far West. This proposed rule would
establish quantities and percentages for Class 1 (Scotch) and Class 3
(Native) spearmint oil for the 2019-2020 marketing year, which begins
on June 1, 2019.
The Act provides that administrative proceedings must be exhausted
before parties may file suit in court. Under section 608c(15)(A) of the
Act, any handler subject to an order may file with USDA a petition
stating that the order, any provision of the order, or any obligation
imposed in connection with the order is not in accordance with law and
request a modification of the order or to be exempted therefrom. Such a
handler is afforded the opportunity for a hearing on the petition.
After the hearing, USDA would rule on the petition. The Act provides
that the district court of the United States in any district in which
the handler is an inhabitant, or has his or her principal place of
business, has jurisdiction to review USDA's ruling on the petition,
provided an action is filed not later than 20 days after the date of
the entry of the ruling.
Pursuant to Sec. Sec. 985.50, 985.51, and 985.52, the Order
requires the Committee to meet each year to consider supply and demand
of spearmint oil and to adopt a marketing policy for the ensuing
marketing year. When such considerations indicate a need to establish
or to maintain stable market conditions through volume regulation, the
Committee recommends salable quantity limitations and producer
allotments (allotments) to regulate the quantity of Far West spearmint
oil available to the market.
According to Sec. 985.12, ``salable quantity'' is the total
quantity of each class of oil (Scotch or Native) that handlers may
purchase from, or handle on behalf of, producers during a given
marketing year. The total industry allotment base is the aggregate of
all allotment bases held individually by producers as prescribed under
Sec. 985.53(d)(1). The total allotment base is generally revised each
year on June 1 due to producer base being lost because of the ``bona
fide effort'' production provision of Sec. 985.53(e).
Each producer's prorated share of the salable quantity of each
class of oil, or their ``annual allotment'' as defined in Sec. 985.13,
is calculated by using an allotment percentage. The percentage is
derived by dividing the salable quantity by the total industry
allotment base for that same class of oil.
The Committee met on October 17, 2018, to consider its marketing
policy for the 2019-2020 marketing year. At that meeting, the Committee
determined that, based on the current market and supply conditions,
volume regulation for both classes of oil would be necessary. With a 6-
2 vote, the Committee recommended a salable quantity and allotment
percentage for Scotch spearmint oil of 832,081 pounds and 38 percent.
The two members voting in opposition to the recommendation favored
volume regulation, but at an undesignated higher level than what was
proposed. The Committee voted unanimously on its recommended salable
quantity and allotment percentage for Native spearmint oil of 1,395,813
pounds and 56 percent. Salable quantities and allotment percentages
have been placed into effect each season since the Order's inception in
1980.
Scotch Spearmint Oil
The Committee's recommended 2019-2020 marketing year salable
quantity and allotment percentage for Scotch spearmint oil represent an
increase from the previous year's levels. The proposed 2019-2020
marketing year salable quantity of 832,081 pounds is 71,421 pounds more
than the 2018-2019 marketing year salable quantity of 760,660 pounds.
The allotment percentage, recommended at 38 percent for the 2019-2020
marketing year, is an increase from the 35 percent in effect the
previous year. The total estimated allotment base for the coming
marketing year is estimated at 2,189,668 pounds. This figure represents
a one-percent increase over the 2018-2019 marketing year total
allotment base of 2,168,008.
The Committee considered several factors in making its
recommendation, including the current and projected future supply,
estimated future demand, production costs, and producer prices. The
Committee's recommendation also accounts for established acreage of
Scotch spearmint oil, consumer demand, existing carry-in, reserve pool
volume, and increased production in competing markets.
According to the Committee, as costs of production have increased,
many producers have forgone new plantings of Scotch spearmint. This has
resulted in a significant decline in production of Scotch spearmint oil
over past years. Production has decreased from 1,113,346 pounds
produced in 2016, to 817,857 pounds produced in 2017, and to an
estimated 671,662 pounds for 2018.
Industry reports also indicate that the relatively low trade demand
for Scotch spearmint oil is likely the result of decreased consumer
demand for spearmint-flavored products, especially chewing gum in China
and India. Scotch spearmint oil sales have averaged 794,808 pounds per
year over the last three years, and 902,076 pounds over the last five
years. For the 2018-2019 crop, the Committee estimates trade demand to
be 805,000 pounds.
In addition, increasing production of spearmint oil in competing
markets, most notably Canada and the U.S. Midwest, has also put
downward pressure on the Scotch market.
Given the general decline in demand and anticipated market
conditions for the coming year, the Committee decided it was prudent to
estimate that the Scotch spearmint oil trade demand for the 2019-2020
marketing year trade would be 805,000 pounds, unchanged from the prior
year. Should the proposed volume regulation levels prove insufficient
to adequately supply the market, the Committee has the authority to
recommend intra-seasonal increases, as it has in previous marketing
years.
The Committee calculated the minimum salable quantity of Scotch
spearmint oil that would be required during the 2019-2020 marketing
year (590,335 pounds) by subtracting the estimated salable carry-in on
June 1, 2019, (214,645) from the estimated trade demand (805,000). This
minimum salable quantity represents the minimum amount of Scotch
spearmint oil that may be needed to satisfy estimated demand for the
coming year. To ensure that the market would be fully supplied, the
Committee recommended a 2019-2020 marketing year salable quantity of
832,081 pounds. The recommended salable quantity of 832,081 pounds,
combined with an estimated 214,645 pounds of salable quantity carried
in from the previous year, would yield a total available supply of
1,046,726 pounds Scotch spearmint oil for the 2019-2020 marketing year,
and would leave an estimated 241,726 pounds of salable oil to carry
into the 2020-2021 marketing year.
Salable carry-in is the primary measure of excess spearmint oil
supply under the Order, as it represents overproduction in prior years
that is currently available to the market without restriction. Under
volume regulation, spearmint oil that is designated as salable
continues to be available to the market until it is sold and may be
marketed at any time at the discretion of the owner. Salable quantities
established under volume regulation over the last three seasons have
exceeded sales, leading to a
[[Page 4383]]
gradual build of Scotch spearmint oil salable carry-in.
The Committee estimates that there will be 215,757 pounds of
salable carry-in of Scotch spearmint oil on June 1, 2019. If current
market conditions are maintained and the Committee's projections are
correct, salable carry-in would increase to 241,726 pounds at the
beginning of the 2020-2021 marketing year. This level would be above
the quantity that the Committee generally considers favorable (150,000
pounds). However, the Committee anticipates that this higher salable
carry-in would be manageable given the expected declining production
levels of Scotch spearmint oil. The Committee believes that, given the
current economic conditions in the Scotch spearmint oil industry, some
Scotch spearmint oil producers will not produce enough oil in the 2019-
2020 marketing year to fill all of their base allotment. Therefore, it
is anticipated that the actual quantity of Scotch spearmint oil carried
into the next marketing year will be less than the quantity calculated
above.
Spearmint oil held in reserve is oil that has been produced in
excess of a producer's marketing year allotment and is not available to
the market in the current marketing year without an increase in the
salable quantity and allotment percentage. Oil held in the reserve pool
is another indicator of excess supply. Scotch spearmint oil held in the
reserve pool, which was completely depleted at the beginning of the
2014-2015 marketing year, has been gradually increasing over the past
five years. The Committee reported that there were 71,088 pounds of
Scotch spearmint oil held in the reserve pool as of May 31, 2017. The
reserve pool increased to 202,638 pounds on May 31, 2018 but is
expected to drop back down to 115,473 pounds by May 31, 2019. This
quantity of reserve pool oil should be an adequate buffer to supply the
market, if necessary, if the industry experiences an unexpected
increase in demand.
The Committee recommended a producer allotment percentage of 38
percent for the 2019-2020 marketing year for Scotch spearmint oil.
During its October 17, 2018, meeting, the Committee calculated an
initial allotment percentage by dividing the minimum required salable
quantity (590,355 pounds) by the total estimated allotment base
(2,189,688 pounds), resulting in 27 percent. However, producers and
handlers at the meeting indicated that the computed percentage (27
percent) might not adequately supply the potential 2019-2020 Scotch
spearmint oil market demand and may also result in inadequate carry-in
for the subsequent marketing year. After deliberation, the Committee
increased the recommended allotment percentage to 38 percent. The total
estimated allotment base (2,189,688 pounds) for the 2019-2020 marketing
year multiplied by the recommended salable allotment percentage (38
percent) yields 832,081 pounds, which is the recommended salable
quantity for the 2019-2020 marketing year.
The 2019-2020 marketing year computational data for the Committee's
recommendations is detailed below.
(A) Estimated carry-in of Scotch spearmint oil on June 1, 2019:
214,645 pounds. This figure is the difference between the 2018-2019
marketing year total available supply of 1,019,645 pounds and the 2018-
2019 marketing year estimated trade demand of 805,000 pounds.
(B) Estimated trade demand of Scotch spearmint oil for the 2019-
2020 marketing year: 805,000 pounds. This figure was established at the
Committee meeting held on October 17, 2018.
(C) Salable quantity of Scotch spearmint oil required from the
2019-2020 marketing year production: 590,355 pounds. This figure is the
difference between the estimated 2019-2020 marketing year trade demand
(805,000 pounds) and the estimated carry-in on June 1, 2019 (214,645
pounds). This salable quantity represents the minimum amount of Scotch
spearmint oil production that may be needed to satisfy estimated demand
for the coming year.
(D) Total estimated Scotch spearmint oil allotment base of for the
2019-2020 marketing year: 2,189,688 pounds. This figure represents a
one-percent increase over the 2018-2019 total actual allotment base of
2,168,008 pounds, as prescribed by Sec. 985.53(d)(1). The one-percent
increase equals 21,680 pounds. This total estimated allotment base is
generally revised each year on June 1 in accordance with Sec.
985.53(e).
(E) Computed Scotch spearmint oil allotment percentage for the
2019-2020 marketing year: 27 percent. This percentage is computed by
dividing the minimum required salable quantity (590,355 pounds) by the
total estimated allotment base (2,189,688 pounds).
(F) Recommended Scotch spearmint oil allotment percentage for the
2019-2020 marketing year: 38 percent. This is the Committee's
recommendation and is based on the computed allotment percentage (27
percent) and input from producers and handlers at the October 17, 2018,
meeting. The recommended 38 percent allotment percentage reflects the
Committee's belief that the computed percentage (27 percent) may not
adequately supply anticipated 2019-2020 Scotch spearmint oil market
demand.
(G) Recommended Scotch spearmint oil salable quantity for the 2019-
2020 marketing year: 832,081 pounds. This figure is the product of the
recommended salable allotment percentage (38 percent) and the total
estimated allotment base (2,189,688 pounds) for the 2019-2020 marketing
year.
(H) Estimated total available supply of Scotch spearmint oil for
the 2019-2020 marketing year: 1,046,726 pounds. This figure is the sum
of the 2019-2020 marketing year recommended salable quantity (832,081
pounds) and the estimated carry-in on June 1, 2019 (214,645 pounds).
For the reasons stated above, the Committee believes that the
recommended salable quantity and allotment percentage would adequately
satisfy trade demand, would result in a reasonable carry-in for the
following year, and would contribute to the orderly marketing of Scotch
spearmint oil.
Native Spearmint Oil
The Committee recommended a Native spearmint oil salable quantity
of 1,395,813 pounds and an allotment percentage of 56 percent for the
2019-2020 marketing year. These figures are, respectively, 87,866
pounds and 3 percentage points higher than the levels established for
the 2018-2019 marketing year.
The Committee utilized handlers' anticipated sales estimates of
Native spearmint oil for the coming year, historical and current Native
spearmint oil production, inventory statistics, and international
market data obtained from consultants for the spearmint oil industry to
arrive at these recommendations.
The Committee anticipates that 2018 production will total 1,477,128
pounds, similar to last year's production but down from 1,694,684
pounds produced in 2016. Committee figures show that total Native
spearmint acres remained relatively static and that the estimated
yield, at 167.4 pounds per acre, was up from 160.9 pounds per acre in
2017. Sales of Native spearmint oil for the 2017-2018 marketing year
spiked, up 21 percent from the previous year to 1,565,515 pounds. Sales
for the current marketing year have cooled a bit, but the Committee
still estimates sales through the 2018-2019 marketing year of 1,450,000
pounds.
The Committee expects that only 8,005 pounds of salable Native
[[Page 4384]]
spearmint oil from prior years will be carried into the 2019-2020
marketing year. This amount is down from the 48,062 pounds of salable
oil carried into the 2018-2019 marketing year, and 143,011 pounds
carried into the 2017-2018 marketing year.
Further, the Committee estimates that there will be 1,150,927
pounds of Native spearmint oil in the reserve pool at the beginning of
the 2019-2020 marketing year. This figure is 130,344 pounds higher than
the quantity of reserve pool oil held by producers the previous year
and is consistent with the gradual increase in reserves experienced
over the past three marketing years.
The Committee expects end users of Native spearmint oil to continue
to rely on Far West production as their main source of high-quality
Native spearmint oil, but demand may be at lower quantities than the
past year moving forward in response to long-term market factors. A
sharp spike in demand for Native spearmint oil was experienced by
handlers late in the 2017-2018 marketing year, spurred by the
popularity of a new product in the market. This sharp spike in demand
caused the remaining available 2017-2018 marketing year salable
quantity to be depleted. While sales in the 2018-2019 marketing year
are expected to come down from the prior year spike, the Committee
still anticipates demand at relatively high levels.
The Committee estimates the 2019-2020 marketing year Native
spearmint oil trade demand to be 1,400,000 pounds. This figure is based
on input provided by producers at six production area meetings held in
mid-October 2018, as well as estimates provided by handlers and other
meeting participants at the October 17, 2018, meeting. This figure
represents a decrease of 50,000 pounds from the previous year's
estimate. The average estimated trade demand for Native spearmint oil
derived from the producer meetings was 1,380,000 pounds, whereas the
handlers' estimates ranged from 1,300,000 to 1,500,000 pounds. The
average of Native spearmint oil sales over the last three years is
1,364,782 pounds. The quantity marketed over the most recent full
marketing year, 2017-2018, was 1,565,515 pounds. However, the Committee
considers that year to be an anomaly. The Committee chose to be
slightly conservative in the establishment of its trade demand estimate
for the 2019-2020 marketing year to avoid oversupplying the market.
The estimated 2019-2020 marketing year carry-in of 8,005 pounds of
Native spearmint oil, plus the recommended salable quantity of
1,395,813 pounds, would result in an estimated total available supply
of 1,403,818 pounds of oil during the 2019-2020 marketing year. With
the corresponding estimated trade demand of 1,400,000 pounds, the
Committee projects that 3,818 pounds of oil will be carried into the
2019-2020 marketing year, resulting in a decrease of 4,187 pounds year-
over-year. The Committee estimates that there will be 1,150,927 pounds
of Native spearmint oil held in the reserve pool at the beginning of
the 2019-2020 marketing year. Should the industry experience an
unexpected increase in trade demand, oil in the Native spearmint oil
reserve pool could be released to satisfy that demand.
The Committee recommended a producer allotment percentage of 56
percent for the 2019-2020 marketing year. During its October 17, 2018,
meeting, the Committee calculated an initial producer allotment
percentage by dividing the minimum required salable quantity (1,391,995
pounds) by the total estimated allotment base (2,492,523 pounds),
resulting in 55.8 percent. However, producers and handlers at the
meeting expressed that the computed percentage of 55.8 percent may not
adequately supply the potential 2019-2020 Native spearmint oil market
demand or result in adequate carry-in for the subsequent marketing
year. After deliberation, the Committee increased the recommended
allotment percentage to 56 percent. The total estimated allotment base
(2,492,523 pounds) for the 2019-2020 marketing year multiplied by the
recommended salable allotment percentage (56 percent) yields 1,395,813
pounds, the recommended salable quantity for the year.
The 2019-2020 marketing year computational data for the Committee's
recommendations is further outlined below.
(A) Estimated carry-in of Native spearmint oil on June 1, 2019:
8,005 pounds. This figure is the difference between the revised 2018-
2019 marketing year total available supply of 1,458,005 pounds and the
revised 2018-2019 marketing year estimated trade demand of 1,450,000
pounds.
(B) Estimated trade demand of Native spearmint oil for the 2019-
2020 marketing year: 1,400,000 pounds. This estimate was established by
the Committee at the October 17, 2018, meeting.
(C) Salable quantity of Native spearmint oil required from the
2019-2020 marketing year production: 1,391,995 pounds. This figure is
the difference between the estimated 2019-2020 marketing year estimated
trade demand (1,400,000 pounds) and the estimated carry-in on June 1,
2019 (8,005 pounds). This is the minimum amount of Native spearmint oil
that the Committee believes would be required to meet the anticipated
2019-2020 marketing year trade demand.
(D) Total estimated allotment base of Native spearmint oil for the
2019-2020 marketing year: 2,492,523 pounds. This figure represents a
one-percent increase over the 2018-2019 total actual allotment base of
2,467,845 pounds as prescribed in Sec. 985.53(d)(1). The one-percent
increase equals 24,678 pounds of oil. This estimate is generally
revised each year on June 1, due to adjustments resulting from the bona
fide effort production provisions of Sec. 985.53(e).
(E) Computed Native spearmint oil allotment percentage for the
2019-2020 marketing year: 55.8 percent. This percentage is calculated
by dividing the required salable quantity (1,391,995 pounds) by the
total estimated allotment base (2,492,523 pounds) for the 2019-2020
marketing year.
(F) Recommended Native spearmint oil allotment percentage for the
2019-2020 marketing year: 56 percent. This is the Committee's
recommendation based on the computed allotment percentage (55.8
percent) and input from producers and handlers at the October 17, 2018,
meeting. The recommended 56 percent allotment percentage is also based
on the Committee's belief that the computed percentage (55.8 percent)
may not adequately supply the potential market for Native spearmint oil
in the 2019-2020 marketing year.
(G) Recommended Native spearmint oil 2019-2020 marketing year
salable quantity: 1,395,813 pounds. This figure is the product of the
recommended allotment percentage (56 percent) and the total estimated
allotment base (2,492,523 pounds). This amount is slightly less than
the estimated trade demand for the 2019-2020 marketing year but could
be increased as needed through an intra-seasonal increase in the
salable quantity and allotment percentage.
(H) Estimated available supply of Native spearmint oil for the
2019-2020 marketing year: 1,403,808 pounds. This figure is the sum of
the 2019-2020 recommended salable quantity (1,395,813 pounds) and the
estimated carry-in on June 1, 2019 (8,005 pounds).
The Committee's recommended Scotch and Native spearmint oil salable
quantities and allotment percentages of 832,081 pounds and 38 percent,
and 1,395,813 pounds and 56 percent, respectively, would match the
available supply of each class of spearmint oil to the estimated demand
of each, thus avoiding extreme fluctuations in
[[Page 4385]]
inventories and prices. This proposed rule, if finalized, would be
similar to regulations issued in prior seasons.
The salable quantities in this proposed rule are not expected to
cause a shortage of either class of spearmint oil. Any unanticipated or
additional market demand for either class of spearmint oil which may
develop during the marketing year could be satisfied by an intra-
seasonal increase in the salable quantity and corresponding allotment
percentage. The Order contains a provision in Sec. 985.51 for intra-
seasonal increases to allow the Committee the flexibility to respond
quickly to changing market conditions.
Under volume regulation, producers who produce more than their
annual allotments during the marketing year may transfer such excess
spearmint oil to producers who have produced less than their annual
allotment. In addition, on December 1 of each year, producers who have
not transferred their excess spearmint oil to other producers must
place their excess spearmint oil production into the reserve pool to be
released in the future in accordance with market needs and under the
Committee's direction.
In conjunction with the issuance of this proposed rule, USDA has
reviewed the Committee's marketing policy statement for the 2019-2020
marketing year. The Committee's marketing policy statement, a
requirement whenever the Committee recommends volume regulation, meets
the requirements of Sec. Sec. 985.50 and 985.51.
The establishment of the proposed salable quantities and allotment
percentages would allow for anticipated market needs. In determining
anticipated market needs, the Committee considered historical sales, as
well as changes and trends in production and demand. This proposal
would also provide producers with information regarding the amount of
spearmint oil that should be produced for the 2019-2020 season to meet
anticipated market demand.
Initial Regulatory Flexibility Act
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601-612), the Agricultural Marketing Service (AMS)
has considered the economic impact of this proposed rule 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
businesses subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and the rules issued thereunder, are unique in
that they are brought about through group action of essentially small
entities acting on their own behalf.
There are approximately 33 producers and 90 producers of Scotch and
Native spearmint oil, respectively, in the regulated production area
and approximately 8 spearmint oil handlers subject to regulation under
the Order. Small agricultural service firms are defined by the Small
Business Administration (SBA) as those having annual receipts of less
than $7,500,000, and small agricultural producers are defined as those
having annual receipts of less than $750,000 (13 CFR 121.201).
The Committee reported that recent producer prices for spearmint
oil range from $15.50 to $18.00 per pound. The National Agricultural
Statistics Service (NASS) reported that the 2017 U.S. season average
spearmint oil producer price per pound was $16.20. Multiplying $16.20
per pound by 2016-17 spearmint oil utilization of 2,186,751 million
pounds yields a crop value estimate of about $35.4 million. Total 2016-
17 spearmint oil utilization, reported by the Committee, is 621,236
pounds and 1,565,515 pounds for Scotch and Native spearmint oil,
respectively.
Given the accounting requirements for the volume regulation
provisions of the Order, the Committee maintains accurate records of
each producer's production and sales. Using the $16.20 average
spearmint oil price, and Committee production data for each producer,
the Committee estimates that 11 of the 33 Scotch spearmint oil
producers and 34 of the 90 Native spearmint oil producers could be
classified as small entities under the SBA definition.
There is no third party or governmental entity that collects and
reports spearmint oil prices received by spearmint oil handlers.
However, the Committee estimates an average spearmint oil handling
markup at approximately 20 percent of the price received by producers.
Multiplying 1.20 by the 2016 producer price of $16.20 yields a handler
f.o.b. price per pound estimate of $19.44.
Multiplying this handler f.o.b price by spearmint oil utilization
of 2,186,751 pounds results in an estimated handler-level spearmint oil
value of $42.5 million. Dividing this figure by the number of handlers
(8) yields estimated average annual handler receipts of about $5.3
million, which is below the SBA threshold for small agricultural
service firms.
Furthermore, using confidential data on pounds handled by each
handler, and the abovementioned estimated handler price per pound, the
Committee reported that it is likely that at least two of the eight
handlers had 2017-2018 marketing year spearmint oil sales value that
exceeded the SBA threshold.
Therefore, in view of the foregoing, the majority of producers of
spearmint oil may be classified as large entities and the majority of
handlers of spearmint oil may be classified as small entities.
This proposed rule would establish the quantity of spearmint oil
produced in the Far West, by class, which handlers may purchase from,
or handle on behalf of, producers during the 2019-2020 marketing year.
The Committee recommended this action to help maintain stability in the
spearmint oil market by matching supply to estimated demand, thereby
avoiding extreme fluctuations in supplies and prices. Establishing
quantities that may be purchased or handled during the marketing year
through volume regulations allows producers to coordinate their
spearmint oil production with the expected market demand. Authority for
this proposal is provided in Sec. Sec. 985.50, 985.51, and 985.52.
The Committee estimated trade demand for the 2019-2020 marketing
year for both classes of oil at 2,205,000 pounds and expects that the
combined salable carry-in will be 222,650 pounds. The combined required
salable quantity is 1,982,350 pounds. Under volume regulation, total
sales of spearmint oil by producers for the 2019-2020 marketing year
would be held to 2,450,544 pounds (the recommended salable quantity for
both classes of spearmint oil of 2,227,894 pounds plus 222,650 pounds
of carry-in). This total available supply of 2,450,544 pounds should be
more than adequate to supply the 2,205,000 pounds of anticipated total
trade demand for spearmint oil. In addition, as of May 31, 2018, the
total reserve pool for both classes of spearmint oil stood at 1,223,221
pounds. Furthermore, that quantity is expected to rise over the course
of the 2018-2019 marketing year to 1,266,400. Should trade demand
increase unexpectedly during the 2019-2020 marketing year, reserve pool
spearmint oil could be released into the market to supply that increase
in demand.
The recommended allotment percentages, upon which 2019-2020
producer allotments are based, are 38 percent for Scotch spearmint oil
and 56 percent for Native spearmint oil. Without volume regulation,
producers
[[Page 4386]]
would not be held to these allotment levels, and could sell
unrestricted quantities of spearmint oil. The USDA econometric model
estimated that the season average producer price per pound (from both
classes of spearmint oil) would decline about $2.20 per pound because
of the higher quantities of spearmint oil that would be produced and
marketed without volume regulation. The surplus situation for the
spearmint oil market that would exist without volume regulation in
2019-2020 also would likely dampen prospects for improved producer
prices in future years because of the buildup in stocks.
The use of volume regulation allows the industry to fully supply
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume regulation is believed to
have little or no effect on consumer prices of products containing
spearmint oil and would not result in fewer retail sales of such
products.
The Committee discussed alternatives to the recommendations
contained in this rule for both classes of spearmint oil. The Committee
rejected the idea of not regulating any volume for either class of
spearmint oil because of the severe, price-depressing effects that
would likely occur without volume regulation. The Committee also
discussed and considered salable quantities and allotment percentages
that were above and below the levels that were ultimately recommended
for both classes of spearmint oil. Ultimately, the action taken by the
Committee was to increase the salable quantity and allotment percentage
for both Scotch and Native spearmint oil from the levels established
for the 2018-2019 marketing year.
As noted earlier, the Committee's recommendation to establish
salable quantities and allotment percentages for both classes of
spearmint oil was made after careful consideration of all available
information including: (1) The estimated quantity of salable oil of
each class held by producers and handlers; (2) the estimated demand for
each class of oil; (3) the prospective production of each class of oil;
(4) the total of allotment bases of each class of oil for the current
marketing year and the estimated total of allotment bases of each class
for the ensuing marketing year; (5) the quantity of reserve oil, by
class, in storage; (6) producer prices of oil, including prices for
each class of oil; and (7) general market conditions for each class of
oil, including whether the estimated season average price to producers
is likely to exceed parity.
Based on its review, the Committee believes that the salable
quantities and allotment percentages recommended would achieve the
objectives sought. The Committee also believes that, should there be no
volume regulation in effect for the upcoming marketing year, the Far
West spearmint oil industry would return to the pronounced cyclical
price patterns that occurred prior to the promulgation of the Order. As
previously stated, annual salable quantities and allotment percentages
have been issued for both classes of spearmint oil since the Order's
inception. The salable quantities and allotment percentages proposed
herein are expected to facilitate the goal of maintaining orderly
marketing conditions for Far West spearmint oil for the 2019-2020 and
future marketing years.
Costs to producers and handlers, large and small, resulting from
this proposal are expected to be offset by the benefits derived from a
more stable market and increased returns. The benefits of this rule are
expected to be equally available to all producers and handlers
regardless of their size.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Chapter 35), the Order's information collection requirements have been
previously approved by OMB and assigned OMB No. 0581-0178, Specialty
Crops. No changes are necessary in those requirements as a result of
this action. Should any changes become necessary, they would be
submitted to OMB for approval.
This proposed rule would establish the salable quantities and
allotment percentages for Scotch spearmint oil and Native spearmint oil
produced in the Far West during the 2019-2020 marketing year.
Accordingly, this proposal would not impose any additional reporting or
recordkeeping requirements on either small or large spearmint oil
producers or handlers. 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.
AMS is committed to complying with the E-Government Act, to promote
the use of the internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this proposed rule.
In addition, the Committee's meeting was widely publicized
throughout the spearmint oil industry and all interested persons were
invited to attend the meeting and participate in Committee
deliberations on all issues. Like all Committee meetings, the October
17, 2018, meeting was a public meeting and all entities, both large and
small, were able to express views on this issue. Finally, interested
persons are invited to submit comments on this proposed rule, including
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/rules-regulations/moa/small-businesses. Any questions
about the compliance guide should be sent to Richard Lower 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. All written comments timely received will be
considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats, Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the preamble, 7 CFR part 985 is
proposed to be amended as follows:
PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST
0
1. The authority citation for 7 CFR part 985 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. A new Sec. 985.234 is added to read as follows:
Sec. 985.234 Salable quantities and allotment percentages--2019-2020
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2019,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 832,081 pounds and
an allotment percentage of 38 percent.
(b) Class 3 (Native) oil--a salable quantity of 1,395,813 pounds
and an allotment percentage of 56 percent.
Sec. 985.236 [Removed]
0
3. Remove Sec. 985.236.
[[Page 4387]]
Dated: February 12, 2019
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2019-02514 Filed 2-14-19; 8:45 am]
BILLING CODE 3410-02-P
