Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2020-2021 Marketing Year
| Citation | 85 FR 9699 |
| Record Number | 2020-03008 |
| Published date | 20 February 2020 |
| Court | Agricultural Marketing Service |
Federal Register, Volume 85 Issue 34 (Thursday, February 20, 2020)
[Federal Register Volume 85, Number 34 (Thursday, February 20, 2020)]
[Proposed Rules]
[Pages 9699-9704]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03008]
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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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Federal Register / Vol. 85, No. 34 / Thursday, February 20, 2020 /
Proposed Rules
[[Page 9699]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Doc. No. AMS-SC-19-0096; SC20-985-1 PR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2020-2021 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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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 2020-2021 marketing year.
DATES: Comments must be received by April 20, 2020.
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: https://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: https://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:
[email protected] or [email protected].
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: [email protected].
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'[thinsp]'' (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. The Order now in effect states that salable quantities 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 2020-2021 marketing year, which begins
on June 1, 2020.
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 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 in
Sec. 985.53(d)(1). The total allotment base is 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
[[Page 9700]]
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 16, 2019, to consider its marketing
policy for the 2020-2021 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 7-
1 vote, the Committee recommended a salable quantity and allotment
percentage for Scotch spearmint oil of 838,404 pounds and 38 percent.
The member voting in opposition to the recommendation favored volume
regulation, but at a level closer to 30 percent. The Committee voted
unanimously on its recommended salable quantity and allotment
percentage for Native spearmint oil of 1,230,531 pounds and 49 percent.
This proposed action would establish the amount of Scotch and
Native spearmint oil that handlers may purchase from, or handle on
behalf of, producers during the 2020-2021 marketing year, which begins
on June 1, 2020. Salable quantities and allotment percentages have been
in effect each season since the Order's inception in 1980.
Scotch Spearmint Oil
The Committee's recommended 2020-2021 marketing year salable
quantity and allotment percentage for Scotch spearmint oil represent an
increase from the previous year's levels. The proposed 2020-2021
marketing year salable quantity of 838,404 pounds is 6,323 pounds more
than the 2019-2020 marketing year salable quantity of 832,081 pounds.
The allotment percentage, recommended at 38 percent for the 2020-2021
marketing year, is the same as the percentage in effect the previous
year. The total estimated allotment base for the coming marketing year
is estimated at 2,206,325 pounds. This figure represents a one-percent
increase over the 2019-2020 marketing year total allotment base of
2,184,480.
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 an estimated 567,623 pounds produced in 2019.
Industry reports also indicate that trade demand for Far West
Scotch spearmint oil has decreased over the past five years. Scotch
spearmint oil sales have averaged 832,522 pounds per year over the last
five years, while sales have averaged just 720,992 pounds over the last
three years. For the 2020-2021 marketing year, the Committee estimates
trade demand to be 750,000 pounds, a little higher than the rolling
three-year average. In addition to declining spearmint oil demand,
increasing production of Scotch spearmint oil in competing markets,
most notably Canada and the U.S. Midwest, has put additional downward
pressure on the Far West Scotch spearmint oil 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 2020-2021
marketing year trade would be 750,000 pounds, 55,000 pounds lower than
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 2020-2021 marketing
year (471,029 pounds) by subtracting the estimated salable carry-in on
June 1, 2020, (278,971) from the estimated trade demand (750,000). This
minimum salable quantity represents the estimated minimum amount of
Scotch spearmint oil that would be needed to satisfy estimated trade
demand for the coming year. To ensure that the market would be fully
supplied, the Committee recommended a 2020-2021 marketing year salable
quantity of 838,404 pounds. The recommended salable quantity of 838,404
pounds, combined with an estimated 278,971 pounds of salable quantity
carried in from the previous year, would yield a total available supply
of 1,117,375 pounds Scotch spearmint oil for the 2020-2021 marketing
year, and would leave an estimated 367,375 pounds of salable oil to
carry into the 2021-2022 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 four seasons have
exceeded sales, leading to a gradual build of Scotch spearmint oil
salable carry-in.
The Committee estimates that there will be 278,971 pounds of
salable carry-in of Scotch spearmint oil on June 1, 2020. If current
market conditions are maintained and the Committee's projections are
correct, salable carry-in would increase to 367,375 pounds at the
beginning of the 2021-2022 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 2020-
2021 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. The 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 132,984 pounds of Scotch
spearmint oil were held in the reserve pool as of May 31, 2019. The
Scotch spearmint oil reserve is expected to be about the same at the
end of the 2019-2020 marketing year. 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 2020-2021 marketing year for Scotch spearmint oil.
During its October 16, 2019, meeting, the
[[Page 9701]]
Committee calculated an initial allotment percentage by dividing the
minimum required salable quantity (471,029 pounds) by the total
estimated allotment base (2,206,325 pounds), resulting in 21.3 percent.
However, producers and handlers at the meeting indicated that the
computed percentage (21.3 percent) might not adequately supply the
potential 2020-2021 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 (2,206,325
pounds) for the 2020-2021 marketing year, multiplied by the recommended
salable allotment percentage (38 percent), yields 838,404 pounds, which
is the recommended salable quantity for the 2020-2021 marketing year.
The 2020-2021 marketing year computational data for the Committee's
recommendations is detailed below.
(A) Estimated carry-in of Scotch spearmint oil on June 1, 2020:
278,971 pounds. This figure is the difference between the 2019-2020
marketing year total available supply of 1,028,971 pounds and the 2019-
2020 marketing year estimated trade demand of 750,000 pounds (revised
down from the original estimate of 805,000 pounds).
(B) Estimated trade demand of Scotch spearmint oil for the 2020-
2021 marketing year: 750,000 pounds. This figure was established at the
Committee meeting held on October 16, 2019.
(C) Salable quantity of Scotch spearmint oil required from the
2020-2021 marketing year production: 471,029 pounds. This figure is the
difference between the estimated 2020-2021 marketing year trade demand
(750,000 pounds) and the estimated carry-in on June 1, 2020 (278,971
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 for the
2020-2021 marketing year: 2,206,325 pounds. This figure represents a
one-percent increase over the 2019-2020 total actual allotment base of
2,184,480 pounds, as prescribed by Sec. 985.53(d)(1). The one-percent
increase equals 21,845 pounds. This total estimated allotment base is
revised each year on June 1 in accordance with Sec. 985.53(e).
(E) Computed Scotch spearmint oil allotment percentage for the
2020-2021 marketing year: 21.3 percent. This percentage is computed by
dividing the minimum required salable quantity (471,029 pounds) by the
total estimated allotment base (2,206,325 pounds).
(F) Recommended Scotch spearmint oil allotment percentage for the
2020-2021 marketing year: 38 percent. This is the Committee's
recommendation and is based on the computed allotment percentage (21.3
percent) and input from producers and handlers at the October 16, 2019,
meeting. The recommended 38 percent allotment percentage reflects the
Committee's belief that the computed percentage (21.3 percent) may not
adequately supply the anticipated 2020-2021 marketing year Scotch
spearmint oil market demand.
(G) Recommended Scotch spearmint oil salable quantity for the 2020-
2021 marketing year: 838,404 pounds. This figure is the product of the
recommended salable allotment percentage (38 percent) and the total
estimated allotment base (2,206,325 pounds) for the 2020-2021 marketing
year.
(H) Estimated total available supply of Scotch spearmint oil for
the 2020-2021 marketing year: 1,117,375 pounds. This figure is the sum
of the 2020-2021 marketing year recommended salable quantity (838,404
pounds) and the estimated carry-in on June 1, 2020 (278,971 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 1,230,531 pounds and an allotment percentage of 49 percent for the
2020-2021 marketing year. These figures are, respectively, 161,918
pounds and 7 percentage points lower than the levels established for
the 2019-2020 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 2020 production will total 1,493,686
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 165.7 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 to 1,565,515 pounds. Sales for the current marketing year have
cooled a bit, but the Committee still estimates sales through the 2019-
2020 marketing year of 1,330,000 pounds, which is near the 7-year
average.
The Committee expects that 274,277 pounds of salable Native
spearmint oil from prior years will be carried into the 2020-2021
marketing year. This amount is up from the 211,828 pounds of salable
oil carried into the 2019-2020 marketing year.
Further, the Committee estimates that there will be 1,153,192
pounds of Native spearmint oil in the reserve pool at the beginning of
the 2020-2021 marketing year. This figure is 101,237 pounds higher than
the quantity of reserve pool oil held by producers the previous year
and is consistent with the gradual increase in reserves that the
industry has 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 its main source of high-quality
Native spearmint oil, with market demand similar to the past year. 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 2020-2021 marketing year
are expected to come down from the 2017-2018 levels, the Committee
still anticipates demand to be relatively high.
The Committee estimates the 2020-2021 marketing year Native
spearmint oil trade demand to be 1,347,042 pounds. This figure is based
on input provided by producers at six production area meetings held in
mid-October 2019, as well as estimates provided by handlers and other
meeting participants at the October 16, 2019, meeting. This figure
represents an increase of 17,042 pounds from the previous year's
estimate. The average estimated trade demand for Native spearmint oil
derived from the producer meetings was 1,347,042 pounds, whereas the
handlers' estimates ranged from 1,150,000 to 1,450,000 pounds. The
average of Native spearmint oil sales over the last three years is
1,366,094 pounds. The quantity marketed over the most recent full
marketing year, 2018-2019, was 1,245,076 pounds. The
[[Page 9702]]
Committee chose to be slightly conservative in the establishment of its
trade demand estimate for the 2020-2021 marketing year to avoid
oversupplying the market.
The estimated 2020-2021 marketing year carry-in of 274,277 pounds
of Native spearmint oil, plus the recommended salable quantity of
1,230,531 pounds, would result in an estimated total available supply
of 1,504,808 pounds of oil during the 2020-2021 marketing year. With
the corresponding estimated trade demand of 1,347,042 pounds, the
Committee projects that 157,766 pounds of oil will be carried into the
2021-2022 marketing year, resulting in a decrease of 116,511 pounds
year-over-year. The Committee estimates that there will be 1,153,192
pounds of Native spearmint oil held in the reserve pool at the
beginning of the 2021-2022 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 49
percent for the 2020-2021 marketing year. During its October 16, 2019,
meeting, the Committee calculated an initial producer allotment
percentage by dividing the minimum required salable quantity (1,072,765
pounds) by the total estimated allotment base (2,511,288 pounds),
resulting in 42.7 percent. However, producers and handlers at the
meeting expressed that the computed percentage of 42.7 percent may not
adequately supply the potential 2020-2021 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 49 percent. The total estimated allotment base
(2,511,288 pounds) for the 2020-2021 marketing year multiplied by the
recommended salable allotment percentage (49 percent) yields 1,230,531
pounds, the recommended salable quantity for the year.
The 2020-2021 marketing year computational data for the Committee's
recommendations is further outlined below.
(A) Estimated carry-in of Native spearmint oil on June 1, 2020:
274,277 pounds. This figure is the difference between the revised 2019-
2020 marketing year total available supply of 1,604,277 pounds and the
revised 2019-2020 marketing year estimated trade demand of 1,330,000
pounds.
(B) Estimated trade demand of Native spearmint oil for the 2020-
2021 marketing year: 1,347,042 pounds. This estimate was established by
the Committee at the October 16, 2019, meeting.
(C) Salable quantity of Native spearmint oil required from the
2020-2021 marketing year production: 1,072,765 pounds. This figure is
the difference between the estimated 2020-2021 marketing year estimated
trade demand (1,347,042 pounds) and the estimated carry-in on June 1,
2020 (274,277 pounds). This is the minimum amount of Native spearmint
oil that the Committee believes would be required to meet the
anticipated 2020-2021 marketing year trade demand.
(D) Total estimated allotment base of Native spearmint oil for the
2020-2021 marketing year: 2,511,288 pounds. This figure represents a
one-percent increase over the 2019-2020 total actual allotment base of
2,486,424 pounds as prescribed in Sec. 985.53(d)(1). The one-percent
increase equals 24,864 pounds of oil. This estimate is 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
2020-2021 marketing year: 42.7 percent. This percentage is calculated
by dividing the required salable quantity (1,072,765 pounds) by the
total estimated allotment base (2,511,288 pounds) for the 2020-2021
marketing year.
(F) Recommended Native spearmint oil allotment percentage for the
2020-2021 marketing year: 49 percent. This is the Committee's
recommendation based on the computed allotment percentage (42.7
percent) and input from producers and handlers at the October 16, 2019,
meeting. The recommended 49 percent allotment percentage is also based
on the Committee's belief that the computed percentage (42.7 percent)
may not adequately supply the potential market for Native spearmint oil
in the 2020-2021 marketing year.
(G) Recommended Native spearmint oil 2020-2021 marketing year
salable quantity: 1,230,531 pounds. This figure is the product of the
recommended allotment percentage (49 percent) and the total estimated
allotment base (2,511,288 pounds). This amount is less than the
estimated trade demand for the 2020-2021 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
2020-2021 marketing year: 1,504,808 pounds. This figure is the sum of
the 2020-2021 recommended salable quantity (1,230,531 pounds) and the
estimated carry-in on June 1, 2020 (274,277 pounds).
The Committee's recommended Scotch and Native spearmint oil salable
quantities and allotment percentages of 838,404 pounds and 38 percent,
and 1,230,531 pounds and 49 percent, respectively, would match the
available supply of each class of spearmint oil to the estimated demand
of each, thus avoiding extreme fluctuations in 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 2020-2021
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 2020-2021 season to meet
anticipated market demand.
Initial Regulatory Flexibility Analysis
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
[[Page 9703]]
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 39 producers and 94 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 $30,000,000, and small agricultural producers are defined as those
having annual receipts of less than $1,000,000 (13 CFR 121.201).
The Committee reported that recent producer prices for spearmint
oil have ranged from $14.00 to $17.00 per pound. The National
Agricultural Statistics Service (NASS) reported that the 2018 U.S.
season average spearmint oil producer price per pound was $16.80.
Multiplying $16.80 per pound by 2017-2018 marketing year spearmint oil
utilization of 1,963,028 million pounds yields a crop value estimate of
about $33.0 million. Total 2017-2018 spearmint oil utilization,
reported by the Committee, was 717,952 pounds and 1,245,076 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 $16.80 average
spearmint oil price, and Committee production data for each producer,
the Committee estimates that 36 of the 39 Scotch spearmint oil
producers and 89 of the 94 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 2018 producer price of $16.80 yields a handler
free on board (f.o.b.) price per pound estimate of $20.16.
Multiplying this handler f.o.b. price by spearmint oil utilization
of 1,963,028 pounds results in an estimated handler-level spearmint oil
value of $39.6 million. Dividing this figure by the number of handlers
(8) yields estimated average annual handler receipts of about $5.0
million, which is well 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 not likely that any of the 8 handlers had
a 2018-2019 marketing year spearmint oil sales value that exceeded the
$30 million SBA threshold.
Therefore, in view of the foregoing, the majority of producers of
spearmint oil may be classified as small entities and all of the
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 2020-2021 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 2020-2021 marketing
year for both classes of oil at 2,097,042 pounds and expects that the
combined salable carry-in will be 553,248 pounds. The combined required
salable quantity is 1,543,794 pounds. Under volume regulation, total
sales of spearmint oil by producers for the 2020-2021 marketing year
would be held to 2,622,183 pounds (the recommended salable quantity for
both classes of spearmint oil of 2,068,935 pounds plus 553,248 pounds
of carry-in).
This total available supply of 2,622,183 pounds should be more than
adequate to supply the 2,097,042 pounds of anticipated total trade
demand for spearmint oil. In addition, as of May 31, 2019, the total
reserve pool for both classes of spearmint oil stood at 1,184,939
pounds. Furthermore, that quantity is expected to rise over the course
of the 2019-2020 marketing year to 1,308,651. Should trade demand
increase unexpectedly during the 2020-2021 marketing year, reserve pool
spearmint oil could be released into the market to supply that increase
in demand.
The recommended allotment percentages, upon which 2020-2021
marketing year producer allotments are based, are 38 percent for Scotch
spearmint oil and 49 percent for Native spearmint oil. Without volume
regulation, producers would not be held to these allotment levels, and
could sell unrestricted quantities of spearmint oil.
The USDA econometric model used to evaluate the Far West spearmint
oil market estimated that the season average producer price per pound
(from both classes of spearmint oil) would decline about $2.10 per
pound without volume regulation. The surplus situation for the
spearmint oil market that would exist without volume regulation in the
2020-2021 marketing year also would likely dampen prospects for
improved producer prices in future years because of the excessive
buildup in stocks.
In addition, the econometric model estimated that spearmint oil
prices would fluctuate with greater amplitude in the absence of volume
regulation. The coefficient of variation, or CV (a standard measure of
variability), of Far West spearmint oil producer prices for the period
1980-2018 (the years in which the Order has been in effect), is 25
percent, compared to 49 percent for the 20-year period (1960-1979)
immediately prior to the establishment of the Order. Since higher CV
values correspond to greater variability, this is an indicator of the
price stabilizing impact of the Order.
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 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 recommended
by the Committee was to maintain the allotment
[[Page 9704]]
percentage for Scotch spearmint oil (which would slightly increase the
salable quantity) and to decrease both the salable quantity and
allotment percentage for Native spearmint oil from the levels
established for the 2019-2020 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 2020-2021 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 Vegetable and
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 2020-2021 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.
USDA has not identified any relevant Federal rules that duplicate,
overlap, or conflict with this proposed rule.
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.
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
16, 2019, meeting was a public meeting and all entities, both large and
small, were able to express views on this issue. 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:
https://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 60-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. Section 985.235 is added to read as follows:
Sec. 985.235 Salable quantities and allotment percentages--2020-2021
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2020,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 838,404 pounds and
an allotment percentage of 38 percent.
(b) Class 3 (Native) oil--a salable quantity of 1,230,531 pounds
and an allotment percentage of 49 percent.
Dated: February 10, 2020.
Bruce Summers,
Administrator, Agricultural Marketing Service.
[FR Doc. 2020-03008 Filed 2-19-20; 8:45 am]
BILLING CODE 3410-02-P
