Farm marketing quotas, acreage allotments, and production adjustments: Peanuts,

[Federal Register: September 9, 1999 (Volume 64, Number 174)]

[Rules and Regulations]

[Page 48938-48942]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr09se99-2]

DEPARTMENT OF AGRICULTURE

Farm Service Agency

7 CFR Part 729

Commodity Credit Corporation

7 CFR Part 1446

RIN 0560-AF 81

1998-Crop Peanuts, National Poundage Quota, National Average Price Support Level for Quota and Additional Peanuts, and Minimum Commodity Credit Corporation Export Edible Sales Price for Additional Peanuts

AGENCIES: Farm Service Agency and Commodity Credit Corporation, USDA.

ACTION: Final rule.

SUMMARY: The purpose of this final rule is to codify determinations made by the Secretary of Agriculture (Secretary) with respect to the 1998 peanut crop: the national poundage quota for quota peanuts is established at 1,167,000 short tons (st); the national average support level for quota peanuts is $610 per st; the national average support level for additional peanuts is set at $175 per st; and the minimum Commodity Credit Corporation (CCC) export edible sales price for price support loan inventory additional peanuts is $400 per st. The poundage quota is established pursuant to statutory requirements contained in the Agricultural Adjustment Act of 1938, as amended (the 1938 Act). The determination of the national average support levels for quota and additional peanuts was made pursuant to the statutory requirements of the Federal Agriculture Improvement and Reform Act of 1996 (the 1996 Act). The determination and announcement of the minimum export edible sale price for additional peanuts is a discretionary action made to facilitate the negotiation of private contracts for export edible peanuts.

EFFECTIVE DATE: September 9, 1999.

FOR FURTHER INFORMATION CONTACT: Kenneth M. Robison, USDA, Farm Service Agency, STOP 0514, 1400 Independence Avenue, SW,

[[Page 48939]]

Washington, DC 20250-0514, telephone 202-720-9255. Copies of the cost- benefit assessment prepared for this rule can be obtained from Mr. Robison.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This final rule has been determined to be significant for purposes of Executive Order 12866 and, therefore, has been reviewed by OMB.

Federal Assistance Program

The title and number of the Federal Assistance Program, as found in the Catalog of Federal Domestic Assistance, to which this rule applies are: Commodity Loans and Purchases--10.051.

Executive Order 12988

This final rule has been reviewed in accordance with Executive Order 12988. The provisions of this final rule do not preempt State laws, are not retroactive, and do not involve administrative appeals.

Paperwork Reduction Act

These proposed amendments do not contain information collections that require clearance by the Office of Management and Budget (OMB) under the provisions of 44 U.S.C. Chapter 35.

Regulatory Flexibility Act

It has been determined that the Regulatory Flexibility Act is not applicable to this final rule because the Farm Service Agency (FSA) nor Commodity Credit Corporation (CCC) are required by 5 U.S.C. 553 or any other provision of law to publish a notice of proposed rulemaking with respect to the subject of these determinations.

Unfunded Federal Mandates

This rule contains no Federal mandates under the regulatory provisions of Title II of the Unfunded Mandate Reform Act (UMRA), for State, local, and tribal governments or the private sector. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Background

1. Announcement of the Quota

   Peanut producers voting in a mail referendum December 1 through 4, 1997, approved poundage quotas for the 1998 through 2002 marketing years (MY) by 94.8 percent. Therefore, the Secretary must offer a 1998- crop peanut program.

   Section 358-1(a)(1) of the 1938 Act, as amended by the 1996 Act, requires that the national poundage quota for peanuts for each of the 1996 through 2002 MYs be established by the Secretary at a level that is equal to the quantity of peanuts (in tons) that the Secretary estimates will be devoted in each MY to domestic edible (excluding seed) and related uses. As to seed, section 358-1(b)(2)(B) of the 1938 Act, as amended, provides that a temporary allocation of quota pounds for the MY only shall be made to producers for each of the 1996 through 2002 MY and that the temporary seed quota allocation shall be equal to the pounds of seed peanuts planted on the farm as may be adjusted and determined under regulations prescribed by the Secretary. The MY for 1998-crop peanuts runs from August 1, 1998, through July 31, 1999.

   The national poundage quota for the 1998 MY was established at 1,167,000 st, based on the following data:

   Estimated Domestic Edible and Related Uses for 1998-Crop Peanuts

   Farmer stock Item

   equivalent (short tons)

   Domestic edible: Domestic production:

   For domestic food use...............................

   950,500

   On-farm and local sales.............................

   9,500 Related uses: Crushing residual.....................................

   125,000 Shrinkage and other losses............................

   38,000 Segregation 2 and 3 loan: Transfers to quota loan...............................

   5,000 Under production........................................

   39,000

   Total............................................... 1,167,000

   The estimate of MY 1998 domestic food use of peanuts was developed in two steps. First, the farmer stock equivalent of 1,105,500 st was estimated by the USDA Interagency Commodity Estimates Committee (ICEC). Second, this estimate was reduced by 155,000 st to exclude peanut imports, peanut butter imports, and peanut butter exports. Although estimates of domestic edible utilization typically include product exports, peanut butter exports are generally either made from, or may otherwise be credited under section 358(e) of the 1938 Act as being made from additional peanuts. MY 1998 farm use and local sales were estimated at 1 percent of ICEC's MY 1998 production estimate. This percentage reflects the average difference between USDA production data and Federal-State Inspection Service inspection data. About one-half of farm use and local sales is allocated to food use and the remainder to seed, and seed is excluded from quota determinations under amendments to the 1938 Act by the 1996 Act.

   The crushing residual represents the farmer stock equivalent weight of crushing grade kernels shelled from quota peanuts. In any given lot of farmer stock peanuts, a portion of such peanuts is only suitable for the crushing market. The quota consists of the edible and crushing content of the farmer stock weight of quota peanuts. The crushing residual identified above reflects the assumption that crushing grade peanuts will be about 12 percent, on a farmer stock basis, of the total of MY 1998 domestic production.

   The allowance for shrinkage and other losses is an estimate of reduced kernel weight available for milling as well as for kernel losses due to damage, fire, and spillage. These losses were estimated by multiplying a factor of 0.04 times domestic food use. The utilized factor is a FSA estimate equal to the minimum allowable shrinkage used in calculating a handler's obligation to export or crush additional peanuts as set forth in Section 359e(d)(2)(iv) of the 1938 Act. Excessive moisture and weight loss due to foreign material in delivered farmer stock peanuts were not considered since such factors are accounted for as inspection factors at buying points and do not impact quota marketing tonnage.

   The adjustment for Segregation 2 and 3 loan transfers represents transfer of Segregation 2 and 3 peanuts from additional price support loan pools to quota loan pools. Such transfers occur when quota peanut producers have insufficient Segregation 1 peanuts to fill their quotas yet have Segregation 2 and 3 peanuts in additional loan pools which would have been eligible to be pledged as collateral for price support at the quota loan rate, if it were not for quality problems. In such cases, for price support purposes only, these peanuts may be pledged as collateral for price support loans at a discounted quota loan rate. Subject to a national limit of 5,000 st, individual producers can transfer up to 25 percent of their effective farm poundage quota from the additional loan pool and receive 70 percent of the quota loan rate. Regarding the disposition of such peanuts, the CCC will ensure that they are crushed for oil.

   In addition, an allowance has been made for underproduction. Historically, only 92 percent of the quota has been marketed. Since the 1996 Act eliminated the carryover of unmarketed quota pounds, any quota pounds not marketed will be a loss of potential income for producers. It is expected that somewhat more than 92 percent will be marketed. It was assumed, based on a

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   consideration of all factors, that 96.7 percent of the 1998 quota will be marketed. This assumption, together with expected growth in domestic consumption of peanut products through new uses and a small increase in demand because of lower peanut support prices resulted in the setting of a national peanut poundage quota of 1,167,000 st for the 1998 MY. Discussion of Comments

   This determination followed the publication of a proposed rule on December 2, 1997, in the Federal Register (62 FR 63678), which proposed a MY 1998 national poundage quota level between 1,133,000 and 1,175,000 st, an additional price support level between $132 per st to $175 per st, and a minimum CCC sales price for export edible peanuts for sales of price support loan peanuts for the 1998 crop between $350 and $400 per st. There were 13 letters received comprising 19 separate comments in response to the notice during the comment period that ended on December 9, 1997. Comments were submitted by two consumer groups, five manufacturers' groups, two sheller and handler groups, two sheller and handler firms, and two producer organizations. Comments were received relative to quota levels, the additional price support level and the minimum CCC sales price for additional peanuts. In reference to quota levels, the consumer and manufacturer groups were concerned with adequate supplies, stock levels, and all suggested that the quota be set above the recommended range. The sheller association and the buying point association recommended the quota be set at the upper end or above the proposed range. The sheller and the handler recommended no change. The producer groups recommended no change to not more than 2.5 percent increase.

   A larger quota requested by consumer and manufacturer groups would have minimal benefit for consumers of peanut products or the peanut industry. At this time, Bureau of Labor Statistics data for peanut butter does not make the case that lower quota support prices since the 1996 Act have been passed on to consumers. Also, industry sources point out that infrastructure is unevenly distributed across the production belt and that competition among handlers and shellers for grower loyalty keeps prices bid for farmer stock peanuts above the quota support level. Since increases in demand for greater supplies of peanuts is normally small, a quota of 1,250,000 st, as suggested by some commentators, would likely result in a surplus and a loss on loan placements for more than 80,000 st of peanuts. These peanut losses would be around $400 per st. Losses of up to $20 million could occur and result in producer assessments ranging from $15 to $20 per st the following year. For the above stated reasons a quota of 1,250,000 st would not be expected to impact consumer prices and would be expected to adversely affect producer income. In any event, the quota formula is set by statute and the determined quota was calculated using that formula.

2. Additional Peanut Support Level

   Section 155(b)(2) of the 1996 Act provides that price support shall be made available for additional peanuts at such level as the Secretary determines will ensure no losses to CCC from the sale or disposal of such peanuts, taking into consideration the demand for peanut oil and peanut meal, expected prices of other vegetable oils and protein meals, and the demand for peanuts in foreign markets.

   The MY 1998 price support level for additional peanuts was announced at $175 per st on February 13, 1998. The national average price support rate for quota peanuts, for each of the 1996 through 2002 crops, is set at $610 per st by the 1996 Act and is codified at 7 CFR 1446.103.

   The MY 1998 price support level for additional peanuts was established at $175 per st to ensure no losses to CCC from the sale or disposal of additional peanuts. Peanuts are pledged as collateral for price support loans. The peanuts are then sold in order to recoup the loan principal, interest and related costs. The statutory factors have been analyzed as set out below. Based on those factors, it is anticipated that while the current oil market is strong, there is enough uncertainty in the market to suggest caution.

   In making this determination, the following market information was considered:

   1. The domestic use of peanut oil during MY 1998 is forecast to be 105,000 st, up 2 percent from MY 1997 projected domestic use. MY 1998 peanut oil beginning stocks are expected to be 27,500 st, down 36 percent from MY 1997. The MY 1998 average peanut oil price is expected to be $0.413 per pound, down $0.017 per pound from MY 1997.

   2. The domestic use of peanut meal during MY 1998 is forecast to be 150,000 st, up 20,000 st from MY 1997 projected domestic use. MY 1998 peanut meal beginning stocks are expected to be 4,000 st, unchanged from MY 1997. The MY 1998 average peanut meal price is expected to be $147.50 per st, down $22.50 per st from MY 1997.

   3. The domestic disappearance of soybean oil during MY 1998 is forecast to be 7,300,000 st, up 1.7 percent from projected MY 1997 domestic disappearance. MY 1998 soybean oil beginning stocks are expected to be 777,500 st, up about 2.3 percent from MY 1997. The MY 1998 average soybean oil price is expected to be $0.248 per pound, down $0.002 per pound from MY 1997.

   4. The domestic disappearance of cottonseed oil during MY 1998 is forecast to be 515,500 st, up 0.5 percent from projected MY 1997 domestic disappearance. MY 1998 cottonseed oil beginning stocks are expected to be 40,500 st, up 22.7 percent from MY 1997. The MY 1998 average cottonseed oil price is expected to be $0.270 per pound, down $0.0075 per pound from MY 1997.

   5. The domestic disappearance of soybean meal during MY 1998 is forecast to be 29,250,000 st, up 3.5 percent from projected MY 1997 domestic disappearance. MY 1998 soybean meal beginning stocks are expected to be 225,000 st, up about 8.7 percent from MY 1997. The MY 1997 average soybean meal price is expected to be $182.50 per st, down $30.00 per st from MY 1997.

   6. The domestic disappearance of cottonseed meal during MY 1998 is forecast to be 1,640,000 st, down 0.3 percent from projected MY 1997 domestic disappearance. MY 1998 cottonseed meal beginning stocks are expected to be 41,000 st, unchanged from MY 1997. The MY 1998 average cottonseed meal price is expected to be $135.00 per st, down $25 per st from MY 1997.

   7. The world use of peanuts for MY 1997 is expected to be 24.07 million metric tons, down 8.0 percent from MY 1996. World peanut production for MY 1997 is forecast to be 24.58 million metric tons, down 7.8 percent from MY 1996. Ending stocks for MY 1997 are forecast at 0.51 million metric tons, up 4.5 percent from 1996.

   MY 1997 begins with record oil stocks and record imports of oil during MY 1996. Yet MY 1998 peanut oil prices are projected to be 41.3 cents per pound. Based on the supply and use situation at the beginning of MY 1997 and projections for MY 1998, there are conflicting signals in the supply price relationship in the peanut oil market that suggest caution in setting the additional peanut support level. Also, producers are expected to place about 10,000 st of quota peanuts and 140,000 st of additional peanuts under price

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   support loan. The accompanying table shows loan outlays under three additional price support levels and receipts under three bid price (price offer) levels.

   Estimated Peanut Program Outlays and Receipts for MY 1998 [FSA/TPD 12/97]

   Loans Made: \1\

   Quota........................ ........... ........... 10,000 st

   Additional................... ........... ........... 140,000 st Loan Rate: \2\

   Quota........................ $610/st $610/st $610/st

   Additional................... $132/st $150/st $175/st

   Outlays

   Million Dollars

   MY 98............................

   28

   31

   34

   Average Bid Price

   Item \3\......................... $150/st $250/st $325/st

   Receipts

   Million Dollars

   MY 98............................

   23

   38

   49 Net Cost \1\.....................

   0

   0

   0

   \1\ Assumed levels based on 1996/1997 and 1997/98 experiences. \2\ Plus $25/st administrative expense. \3\ Assumes quota and additional loan inventory sold as oil stock to show maximum monetary exposure of assumed loan receipts. \4\ Program must operate at no-net-cost to treasury. Shortfalls are made up through grower assessments and pool dividends.

   Discussion of Comments

   During the comment period that ended December 9, 1997, there were three comments received concerning the 1998 additional peanut price support level. One sheller association and one handler association made specific recommendations on the additional price support level. They recommended a range of $175 to $250 per st. The volume of additional peanuts being bought back and strong prices in the oil seed complex were cited as the reason to increase the additional price support level. The producer group recommended setting the additional support level within the proposed range. The final determination was made for the reasons given above. An analysis of the data for that year is available from the contact person listed above.

3. Announcement of CCC Sales Price for Additional Peanuts Sold for Export Edible Use

   The establishment of a minimum price at which 1998 crop additional peanuts owned or controlled by CCC may be sold for use as edible peanuts in export markets is a discretionary action. The announcement of that price provides producers and handlers with information to facilitate the negotiation of private contracts for the sale of additional peanuts for export.

   An overly high price may discourage private sales. If too low, the minimum price could have an unnecessary, adverse effect on prices paid to producers for additional peanuts. The minimum price at which 1998 crop additional peanuts owned or controlled by CCC may be sold for use as edible peanuts in export markets was established at $400 per st on April 30, 1998. This price should encourage exports while providing price stability for additional peanuts sold under contract. It will also assure handlers that CCC will not undercut their export contracting efforts with offerings of additional peanuts for export edible sales below the announced minimum sales price.

   Advance Notice of Proposed Rule Making

   An Advance Notice of Proposed Rulemaking was published in the Federal Register on August 18, 1997 (62 FR 43955) requesting comments on the method for determining the minimum CCC export edible sales price for additional peanuts. Ten letters containing 10 comments were received during the comment period ending September 30, 1997. Seven comments were from producer groups, two from sheller groups and one from an individual sheller. The seven producer groups recommended no change from the $400 per st level. One sheller group recommended setting an absolute dollar figure each year and ranging between $350 to $375 per st for 1998. One sheller group and one sheller submitted a formula based on the peanut oil market.

   Proposed Rule

   Three letters containing three separate comments concerning the minimum CCC sales price for additional peanuts sold for export edible use were received during the comment period for the Proposed Rule ending December 9, 1997. One sheller group, one handler group, and one grower group made specific comments concerning the sales policy.

   One sheller group resubmitted its proposed formula tied to the peanut oil market to set the minimum CCC export edible sales price for additional peanuts. The handler group and a producer group recommended setting the price at an fixed level. The handler group suggested a range of $350 to $400 per st. The producer group wanted the price to remain at $400 per st. The final price was set based on the factors set forth above.

   List of Subjects

   7 CFR Part 729

   Peanuts, Penalties, Poundage quotas, Reporting and record keeping requirements.

   7 CFR Part 1446

   Loan program--Agriculture, Peanuts, Price support programs, Reporting and recordkeeping requirements, Warehouses.

   Accordingly, this final rule amends 7 CFR parts 729 and 1446 as follows:

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   PART 729--PEANUTS

   1. The authority citation for 7 CFR part 729 continues to read as follows:

      Authority: 7 U.S.C. 1301, 1357 et seq., 1372, 1373, 1375, and 7271.

   2. Section 729.216 paragraph (c) is revised to read as follows:

      Sec. 729.216 National poundage quota.

      * * * * *

      (c) Quota determination for individual marketing years (excluding seed):

      (1) The national poundage quota for quota peanuts for marketing year 1996 is 1,100,000 short tons.

      (2) The national poundage quota for quota peanuts for marketing year 1997 is 1,133,000 short tons.

      (3) The national poundage quota for quota peanuts for marketing year 1998 is 1,167,000 short tons.

      PART 1446--PEANUTS

   3. The authority citation for 7 CFR part 1446 continues to read as follows:

      Authority: 7 U.S.C. 7271, 15 U.S.C. 714b and 714c.

   4. Section 1446.310 is amended by adding new paragraph (c) to read as follows:

      Sec. 1446.310 Additional peanut support levels.

      * * * * *

      (c ) The national support rate for additional peanuts for the 1998 crop is $175 per short ton.

   5. Section 1446.311 is amended by adding new paragraph (c) to read as follows:

      Sec. 1446.311 Minimum CCC sales price for certain peanuts.

      (c) The minimum CCC sales price for additional peanuts to be sold from the price support loan inventory for export edible use from the 1998 and subsequent crops is $400 per short ton.

      Signed at Washington, DC, on August 31, 1999. Keith Kelly, Administrator, Farm Service Agency and Executive Vice President, Commodity Credit Corporation.

      [FR Doc. 99-23377Filed9-8-99; 8:45 am]

      BILLING CODE 3410-05-P