Spearmint oil produced in Far West,

[Federal Register: July 31, 2007 (Volume 72, Number 146)]

[Rules and Regulations]

[Page 41611-41615]

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

[DOCID:fr31jy07-4]

DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Docket Nos. AMS-FV-07-0039; FV07-985-2 FIR]

Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Revision of the Salable Quantity and Allotment Percentage for Class 1 (Scotch) and Class 3 (Native) Spearmint Oil for the 2006-2007 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

SUMMARY: The Department of Agriculture (USDA) is adopting, as a final rule, without change, an interim final rule that revised the quantity of Class 1 (Scotch) and Class 3 (Native) spearmint oil that handlers may have purchased from, or handled for, producers during the 2006-2007 marketing year. This rule continues in effect the action that increased the Scotch spearmint oil salable quantity from 878,205 pounds to 2,984,817 pounds, and the allotment percentage from 45 percent to 153 percent. In addition, this rule continues in effect the action that increased the Native spearmint oil salable quantity from 1,161,260 pounds to 1,205,208 pounds, and the allotment percentage from 53 percent to 55 percent. The marketing order regulates the handling of spearmint oil produced in the Far West and is administered locally by the Spearmint Oil Administrative Committee (Committee). The Committee recommended this rule for the purpose of avoiding extreme fluctuations in supplies and prices and to help maintain stability in the Far West spearmint oil market.

EFFECTIVE DATE: August 30, 2007.

FOR FURTHER INFORMATION CONTACT: Susan M. Hiller, Marketing Specialist, or Gary D. Olson, Regional Manager, Northwest Marketing Field Office, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or E-mail:

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Susan.Hiller@usda.gov or GaryD.Olson@usda.gov.

Small businesses may request information on complying with this regulation by contacting Jay Guerber, Marketing Order Administration Branch, Fruit and Vegetable Programs, AMS, USDA, 1400 Independence Avenue, SW., STOP 0237, Washington, DC 20250-0237; Telephone: (202) 720-2491, Fax: (202) 720-8938, or E-mail: Jay.Guerber@usda.gov.

SUPPLEMENTARY INFORMATION: This rule is issued under Marketing Order No. 985 (7 CFR part 985), as amended, regulating the handling of spearmint oil produced in the Far West (Washington, Idaho, Oregon, and designated parts of Nevada and Utah), hereinafter referred to as the ``order.'' The order is effective under the Agricultural Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674), hereinafter referred to as the ``Act.''

USDA is issuing this rule in conformance with Executive Order 12866.

This rule has been reviewed under Executive Order 12988, Civil Justice Reform. Under the provisions of the marketing order now in effect, salable quantities and allotment percentages may be established for classes of spearmint oil produced in the Far West. This rule continues in effect the action that increased the quantity of Scotch and Native spearmint oil produced in the Far West that may be purchased from or handled for producers by handlers during the 2006-2007 marketing year, which ended on May 31, 2007. This rule will not preempt any State or local laws, regulations, or policies, unless they present an irreconcilable conflict with this rule.

The Act provides that administrative proceedings must be exhausted before parties may file suit in court. Under section 608c(15)(A) of the Act, any handler subject to an order may file with 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. 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.

The original salable quantity and allotment percentages for Scotch and Native spearmint oil for the 2006-2007 marketing year were recommended by the Committee at its October 5, 2005, meeting. The Committee recommended salable quantities of 878,205 pounds and 1,007,886 pounds, and allotment percentages of 45 percent and 46 percent, respectively, for Scotch and Native spearmint oil. A proposed rule was published in the Federal Register on February 1, 2006 (71 FR 5183). Comments on the proposed rule were solicited from interested persons until March 3, 2006. No comments were received. Subsequently, a final rule establishing the salable quantities and allotment percentages for Scotch and Native spearmint oil for the 2006-2007 marketing year was published in the Federal Register on April 5, 2006 (71 FR 16986).

Pursuant to authority contained in Sec. Sec. 985.50, 985.51, and 985.52 of the order, the Committee has made recommendations to increase the quantity of Scotch and Native spearmint oil that handlers may have purchased from, or handled for, producers during the 2006-2007 marketing year, which ended on May 31, 2007. An interim final rule was published in the Federal Register on May 26, 2006 (71 FR 30266), which increased the 2006-2007 salable quantity and allotment percentage for Native spearmint oil to 1,161,260 pounds and 53 percent, respectively. Comments on the interim final rule were solicited from interested persons until July 25, 2006. No comments were received. Subsequently, a final rule establishing the salable quantity and allotment percentage for Native spearmint oil was published in the Federal Register on September 7, 2006 (71 FR 52735).

This rule continues in effect the action that further revised the quantity of Scotch and Native spearmint oil that handlers may have purchased from, or handled for, producers during the 2006-2007 marketing year, which ended on May 31, 2007. The Committee, with all eight members present, met on February 21, 2007, and in two separate motions, recommended that the 2006-2007 Scotch and Native spearmint oil allotment percentages be increased by 108 percent and 2 percent, respectively. The motion to increase the allotment percentage for Scotch was unanimous and the motion to increase the allotment percentage for Native passed with seven members in favor and one member opposed. The member opposing was concerned that there was not enough demand to warrant the 2 percent increase.

Thus, taking into consideration the following discussion on adjustments to the Scotch and Native spearmint oil salable quantities, this rule continues in effect the action that increased the 2006-2007 marketing year salable quantities and allotment percentages for Scotch and Native spearmint oil to 2,984,817 pounds and 153 percent, and 1,205,208 pounds and 55 percent, respectively.

The total industry allotment base for Scotch spearmint oil for the 2006-2007 marketing year was estimated by the Committee at the October 5, 2005 meeting at 1,951,567 pounds. This was later revised at the beginning of the 2006-2007 marketing year to 1,950,861 pounds to reflect a 2005-2006 marketing year loss of 706 pounds of base due to non-production of some producers' total annual allotments. When the revised total allotment base of 1,950,861 pounds is applied to the originally established allotment percentage of 45 percent, the initially established 2006-2007 marketing year salable quantity of 878,205 pounds is effectively modified to 877,887 pounds.

The same situation applies to Native spearmint oil where the Committee estimated that the total industry allotment base for the 2006-2007 marketing year was established at 2,191,056 pounds and was revised at the beginning of the 2006-2007 marketing year to 2,191,287 pounds to reflect a 2005-2006 marketing year gain of 231 pounds of base for new and existing producers. When the revised total allotment base of 2,191,287 pounds is applied to the originally established allotment percentage of 46 percent, the initially established 2006-2007 marketing year salable quantity of 1,007,886 pounds is effectively modified to 1,007,992 pounds.

Each producer is allotted a share of the salable quantity by applying the allotment percentage to the producer's individual allotment base for the applicable class of spearmint oil. By increasing the salable quantities and allotment percentages, this final rule made an additional amount of Scotch and Native spearmint oil available by releasing oil from the reserve pool. When applied to each individual producer, the allotment percentage increase allows each producer to take up to an amount equal to their allotment base from their reserve for this respective class of oil. In addition, pursuant to Sec. Sec. 985.56 and 985.156, producers with excess oil are not able to transfer such excess oil to other producers to fill deficiencies in annual allotments after October 31 of each marketing year.

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The following table summarizes the Committee recommendations:

Scotch Spearmint Oil Recommendation

(A) Estimated 2006-2007 Allotment Base--1,951,567 pounds. This is the estimate on which the original 2006-2007 Scotch spearmint oil salable quantity and allotment percentage was based.

(B) Revised 2006-2007 Allotment Base--1,950,861 pounds. This is 706 pounds less than the estimated allotment base of 1,951,567 pounds. This is less because some producers failed to produce all of their 2005-2006 allotment.

(C) Original 2006-2007 Allotment Percentage--45 percent. This was unanimously recommended by the Committee on October 5, 2005.

(D) Original 2006-2007 Salable Quantity--878,205 pounds. This figure is 45 percent of the estimated 2006-2007 allotment base of 1,951,567 pounds.

(E) Adjustment to the Original 2006-2007 Salable Quantity--877,887 pounds. This figure reflects the salable quantity initially available after the beginning of the 2005-2006 marketing year due to the 706 pound reduction in the industry allotment base to 1,950,861 pounds.

(F) First Revision to the 2006-2007 Salable Quantity and Allotment Percentage:

(1) Increase in Allotment Percentage--108 percent. The Committee recommended a 108 percent increase at its February 21, 2007, meeting.

(2) 2006-2007 Allotment Percentage--153 percent. This figure is derived by adding the increase of 108 percent to the original 2006-2007 allotment percentage of 45 percent.

(3) Calculated Revised 2006-2007 Salable Quantity--2,984,817 pounds. This figure is 153 percent of the adjusted 2006-2007 allotment base of 1,950,861 pounds.

(4) Computed Increase in the 2006-2007 Salable Quantity--2,106,930 pounds. This figure is 108 percent of the adjusted 2006-2007 allotment base of 1,950,861 pounds.

(G) No Second Revision to the 2006-2007 Salable Quantity and Allotment Percentage.

The 2006-2007 marketing year began on June 1, 2006, with an estimated carry-in of 43,057 pounds of salable oil. Of the original 2006-2007 salable quantity of 877,887 pounds, only 708,768 pounds was actually produced. This resulted in an available supply of 751,825 pounds for the 2006-2007 marketing year. Of this amount, 736,904 pounds of Scotch spearmint oil has already been sold or committed for the 2006-2007 marketing year, which left 14,921 pounds available for sale. As of February 15, 2007, the reserve pool was estimated at 13,529 pounds.

In making this recommendation, the Committee considered all available information on price, supply, and demand. The Committee also considered reports and other information from handlers and producers in attendance at the meeting and reports given by the Committee Manager from handlers who were not in attendance. Handlers expressed concern about the limited supply of Scotch spearmint oil remaining and that a significant quantity of this oil is of less than desirable quality. An additional concern was that the remaining spearmint oil was in the possession of only a few producers with minimal allotment base. An example of this would be a producer who has 4,000 pounds of reserve pool oil and only 3,700 pounds of allotment base. The only way a handler could purchase all of this producer's oil was if the allotment percentage was increased to at least 108 percent. Without this increase, the industry may not have been able to meet market demand based on past history and current conditions. Additionally, when the Committee made its original recommendation for the establishment of the Scotch spearmint oil salable quantity and allotment percentage for the 2006-2007 marketing year, it had anticipated that the year would end with an ample available supply.

Native Spearmint Oil Recommendation

(A) Estimated 2006-2007 Allotment Base--2,191,056 pounds. This is the estimate on which the original 2006-2007 Native spearmint oil salable quantity and allotment percentage was based.

(B) Revised 2006-2007 Allotment Base--2,191,287 pounds. This is 231 pounds more than the estimated allotment base of 2,191,056 pounds. This is more because some producers over-produced their 2005-2006 allotment.

(C) Original 2006-2007 Allotment Percentage--46 percent. This was unanimously recommended by the Committee on October 5, 2005.

(D) Original 2006-2007 Salable Quantity--1,007,886 pounds. This figure is 46 percent of the estimated 2006-2007 allotment base of 2,191,056 pounds.

(E) Adjustment to the Original 2006-2007 Salable Quantity-- 1,007,992 pounds. This figure reflects the salable quantity initially available after the beginning of the 2006-2007 marketing year due to the 231 pound gain in the industry allotment base to 2,191,287 pounds.

(F) First Revision to the 2006-2007 Salable Quantity and Allotment Percentage:

(1) Increase in Allotment Percentage--7 percent. The Committee recommended a 7 percent increase at its April 18, 2006, meeting.

(2) 2006-2007 Allotment Percentage--53 percent. This figure is derived by adding the increase of 7 percent to the original 2006-2007 allotment percentage of 46 percent.

(3) Calculated Revised 2006-2007 Salable Quantity--1,161,382 pounds. This figure is 53 percent of the adjusted 2006-2007 allotment base of 2,191,287 pounds.

(4) Computed Increase in the 2006-2007 Salable Quantity--153,390 pounds. This figure is 7 percent of the adjusted 2006-2007 allotment base of 2,191,287 pounds.

(G) Second Revision to the 2006-2007 Salable Quantity and Allotment Percentage:

(1) Increase in Allotment Percentage--2 percent. The Committee recommended a 2 percent increase at its February 21, 2007 meeting.

(2) 2006-2007 Allotment Percentage--55 percent. This figure is derived by adding the increase of 2 percent to the first revised 2006- 2007 allotment percentage of 53 percent.

(3) Calculated Revised 2006-2007 Salable Quantity--1,205,208 pounds. This figure is 55 percent of the adjusted 2006-2007 allotment base of 2,191,287 pounds.

(4) Computed Increase in the 2006-2007 Salable Quantity--43,826 pounds. This figure is 2 percent of the adjusted 2006-2007 allotment base of 2,191,287 pounds.

The 2006-2007 marketing year began on June 1, 2006, with an estimated carry-in of 82,675 pounds of salable oil. When the estimated carry-in was added to the revised 2006-2007 salable quantity of 1,161,382 pounds, a total estimated available supply for the 2006-2007 marketing year of 1,244,057 pounds resulted. Of this amount, 1,130,872 pounds of oil has already been sold or committed for the 2006-2007 marketing year, which left 113,185 pounds available for sale. As of February 15, 2007, the reserve pool was estimated at 223,880 pounds.

In making this recommendation, the Committee considered all available information on price, supply, and demand. The Committee also considered reports and other information from handlers and

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producers in attendance at the meeting and reports given by the Committee Manager from handlers and producers who were not in attendance. On average, handlers estimated that there was a demand for an additional 30,000 pounds to 50,000 pounds of Native spearmint oil for the 2006-2007 marketing year. The Committee was reluctant to increase the salable quantity any more due to the relatively low demand; however the Committee believed that an increase was necessary since handlers expressed their difficulty in finding spearmint oil available for sale. It was also reported that approximately 30,000 pounds to 80,000 pounds of Native spearmint oil was poor quality or re- distilled to improve its chemical composition. Therefore, the industry may not have been able to meet market demand without this increase. In addition, when the Committee made its original recommendation for the establishment of the Native spearmint oil salable quantity and allotment percentage for the 2006-2007 marketing year, it had anticipated that the year would end with an ample available supply.

Based on its analysis of available information, USDA has determined that the salable quantity and allotment percentage for Scotch spearmint oil for the 2006-2007 marketing year should be increased to 2,984,817 pounds and 153 percent, respectively. In addition, USDA has determined that the salable quantity and allotment percentage for Native spearmint oil for the 2006-2007 marketing year should be increased to 1,205,208 pounds and 55 percent, respectively.

This rule finalizes an interim final rule that relaxed the regulation of Scotch and Native spearmint oil and allowed producers to meet market demand while improving producer returns. In conjunction with the issuance of this rule, the Committee's revised marketing policy statement for the 2006-2007 marketing year has been reviewed by USDA. The Committee's marketing policy statement, a requirement whenever the Committee recommends implementing volume regulations or recommends revisions to existing volume regulations, meets the intent of Sec. 985.50 of the order. During its discussion of revising the 2006-2007 salable quantities and allotment percentages, the Committee considered: (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) prospective production of each class of oil; (4) 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. Conformity with USDA's ``Guidelines for Fruit, Vegetable, and Specialty Crop Marketing Orders'' has also been reviewed and confirmed.

The increases in the Scotch and Native spearmint oil salable quantity and allotment percentage allowed for anticipated market needs for both classes of oil. In determining anticipated market needs, consideration by the Committee was given to historical sales, and changes and trends in production and demand.

Final Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA), the Agricultural Marketing Service (AMS) has considered the economic impact of this action on small entities. Accordingly, AMS has prepared this final regulatory flexibility analysis.

The purpose of the RFA is to fit regulatory actions to the scale of business subject to such actions in order that small businesses will not be unduly or disproportionately burdened. Marketing orders issued pursuant to the Act, and 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 eight spearmint oil handlers subject to regulation under the order, and approximately 58 producers of Scotch spearmint oil and approximately 90 producers of Native spearmint oil in the regulated production area. Small agricultural service firms are defined by the Small Business Administration (SBA) (13 CFR 121.201) as those having annual receipts of less than $6,500,000, and small agricultural producers are defined as those having annual receipts of less than $750,000.

Based on the SBA's definition of small entities, the Committee estimates that two of the eight handlers regulated by the order could be considered small entities. Most of the handlers are large corporations involved in the international trading of essential oils and the products of essential oils. In addition, the Committee estimates that 19 of the 58 Scotch spearmint oil producers and 21 of the 90 Native spearmint oil producers could be classified as small entities under the SBA definition. Thus, a majority of handlers and producers of Far West spearmint oil may not be classified as small entities.

The Far West spearmint oil industry is characterized by producers whose farming operations generally involve more than one commodity, and whose income from farming operations is not exclusively dependent on the production of spearmint oil. A typical spearmint oil-producing operation has enough acreage for rotation such that the total acreage required to produce the crop is about one-third spearmint and two- thirds rotational crops. Thus, the typical spearmint oil producer has to have considerably more acreage than is planted to spearmint during any given season. Crop rotation is an essential cultural practice in the production of spearmint oil for weed, insect, and disease control. To remain economically viable with the added costs associated with spearmint oil production, most spearmint oil-producing farms fall into the SBA category of large businesses.

Small spearmint oil producers generally are not as extensively diversified as larger ones and as such are more at risk to market fluctuations. Such small producers generally need to market their entire salable quantity of spearmint oil and do not have the luxury of having other crops to cushion seasons with poor spearmint oil returns. Conversely, large diversified producers have the potential to endure one or more seasons of poor spearmint oil markets because income from other crops could support the operation for a period of time. Being reasonably assured of a stable price and market provides small producing entities with the ability to maintain proper cash flow and to meet annual expenses. Thus, the market and price stability provided by the order potentially benefit the small producer more than such provisions benefit large producers. Even though a majority of handlers and producers of spearmint oil may not be classified as small entities, the volume control feature of this order has small entity orientation.

This rule continues in effect the action that further increased the quantity of Scotch and Native spearmint oil that handlers may have purchased from, or handled for, producers during the 2006-2007 marketing year, which ended on May 31, 2007. This rule continues in effect the action that increased the 2006-2007 marketing year salable quantities and allotment percentages for Scotch and Native spearmint oil to 2,984,817 and 153 percent, and 1,205,208 pounds and 55 percent, respectively.

An econometric model was used to assess the impact that volume control

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has on the prices producers receive for their commodity. Without volume control, spearmint oil markets would likely be over-supplied, resulting in low producer prices and a large volume of oil stored and carried over to the next crop year. The model estimates how much lower producer prices would likely be in the absence of volume controls.

The recommended allotment percentages, upon which 2006-2007 producer allotments were based, are 153 percent for Scotch (a 108- percentage point increase from the original allotment percentage of 45 percent) and 55 percent for Native (a 9 percentage point increase from the original allotment percentage of 46 percent). Without volume controls, producers would not be limited to these allotment levels, and could produce and sell additional spearmint oil. The econometric model estimated a $1.37 decline in the season average producer price per pound of Far West spearmint oil (combining the two classes of spearmint oil) resulting from the higher quantities that would be produced and marketed if volume controls were not used.

A previous price decline estimate of $1.49 per pound was based on the original 2006-2007 allotment percentages (45 percent for Scotch and 46 percent for Native) published in the Federal Register on April 5, 2006 (71 FR 16986). The revised estimate reflects the impact of the additional quantities that have been made available by this rule compared to the original allotment percentages. In actuality, this rule made available 13,026 additional pounds of Scotch and 21,624 additional pounds of Native spearmint oil, since not all producers have reserve pool oil. Loosening the volume control restriction resulted in the smaller price decline estimate of $1.37 per pound.

The use of volume controls allows the industry to fully supply spearmint oil markets while avoiding the negative consequences of over- supplying these markets. The use of volume controls is believed to have little or no effect on consumer prices of products containing spearmint oil and will not result in fewer retail sales of such products.

Based on projections available at the meeting, the Committee considered alternatives to each of the increases. The Committee not only considered leaving the salable quantity and allotment percentage unchanged, but also looked at various increases. The Committee reached each of its recommendations to increase the salable quantity and allotment percentage for Scotch and Native spearmint oil after careful consideration of all available information, and believes that the levels recommended will achieve the objectives sought. Without the increases, the Committee believes the industry would not have been able to meet market needs.

This rule will not impose any additional reporting or recordkeeping requirements on either small or large spearmint oil 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. In addition, as noted in the initial regulatory flexibility analysis, USDA has not identified any relevant Federal rules that duplicate, overlap or conflict with this rule.

The 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.

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. Like all Committee meetings, the February 21, 2007, meeting was a public meeting and all entities, both large and small, were able to express their views on this issue.

An interim final rule concerning this action was published in the Federal Register on April 12, 2007. A notice of the rule was mailed by the Committee's staff to all committee members, producers, handlers, and other interested persons. In addition, the rule was made available through the Internet by USDA and the Office of the Federal Register. That rule provided for a 60-day comment period which ended June 11, 2007. No comments were received.

A small business guide on complying with fruit, vegetable, and specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/fv/moab.html. Any questions about the compliance

guide should be sent to Jay Guerber at the previously mentioned address in the FOR FURTHER INFORMATION CONTACT section.

After consideration of all relevant material presented, including the Committee's recommendation, and other information, it is found that finalizing the interim final rule, without change, as published in the Federal Register (72 FR 18345, April 12, 2007) will tend to effectuate the declared policy of the Act.

List of Subjects in 7 CFR Part 985

Marketing agreements, Oils and fats, Reporting and recordkeeping requirements, Spearmint oil.

PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL PRODUCED IN THE FAR WEST

0 Accordingly, the interim final rule amending 7 CFR part 985, which was published at 71 FR 18345 on April, 12, 2007, is adopted as a final rule without change.

Dated: July 24, 2007. Lloyd C. Day, Administrator, Agricultural Marketing Service. [FR Doc. E7-14622 Filed 7-30-07; 8:45 am]

BILLING CODE 3410-02-P