[Federal Register Volume 78, Number 72 (Monday, April 15, 2013)]
[Proposed Rules]
[Pages 22202-22209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-08681]
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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. 78, No. 72 / Monday, April 15, 2013 /
Proposed Rules
[[Page 22202]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 985
[Doc. No. AMS-FV-12-0064; FV13-985-1 PR]
Marketing Order Regulating the Handling of Spearmint Oil Produced
in the Far West; Salable Quantities and Allotment Percentages for the
2013-2014 Marketing Year
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Proposed rule.
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SUMMARY: This proposed rule would establish the quantity of spearmint
oil produced in the Far West, by class, that handlers may purchase
from, or handle on behalf of, producers during the 2013-2014 marketing
year, which begins on June 1, 2013. This proposal invites comments on
the establishment of salable quantities and allotment percentages for
Class 1 (Scotch) spearmint oil of 1,344,858 pounds and 65 percent,
respectively, and for Class 3 (Native) spearmint oil of 1,432,189
pounds and 61 percent, respectively. The Spearmint Oil Administrative
Committee (Committee), the agency responsible for local administration
of the marketing order for spearmint oil produced in the Far West,
recommended these limitations for the purpose of avoiding extreme
fluctuations in supplies and prices to help maintain stability in the
spearmint oil market.
DATES: Comments must be received by April 30, 2013.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposal. Comments must be sent to the Docket Clerk,
Marketing Order and Agreement Division, Fruit and Vegetable Program,
AMS, USDA, 1400 Independence Avenue SW., STOP 0237, Washington, DC
20250-0237; Fax: (202) 720-8938; or Internet: http://www.regulations.gov. All comments should reference the document number
and the date and page number of this issue of the Federal Register and
will be made available for public inspection in the Office of the
Docket Clerk during regular business hours, or can be viewed at: http://www.regulations.gov. All comments submitted in response to this
proposed rule will be included in the record and will be made available
to the public. Please be advised that the identity of the individuals
or entities submitting the comments will be made public on the Internet
at the address provided above.
FOR FURTHER INFORMATION CONTACT: Barry Broadbent, Marketing Specialist,
or Gary Olson, Regional Director, Northwest Marketing Field Office,
Marketing Order and Agreement Division, Fruit and Vegetable 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 Jeffrey Smutny, Marketing Order and Agreement
Division, Fruit and Vegetable 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 proposed 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.''
The Department of Agriculture (USDA) is issuing this proposed rule
in conformance with Executive Order 12866.
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. Under 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 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 2013-2014 marketing year, which begins on June 1,
2013.
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 Committee meets annually in the fall to adopt a marketing
policy for the ensuing marketing year or years. In determining such
marketing policy, the Committee considers a number of factors,
including, but not limited to, the current and projected supply,
estimated future demand, production costs, and producer prices for all
classes of spearmint oil. Input from spearmint oil handlers and
producers regarding prospective marketing conditions is considered as
well. During the meeting, the Committee recommends to USDA any volume
regulations deemed necessary to meet market requirements and to
establish orderly marketing conditions for Far West spearmint oil. If
the Committee's marketing policy considerations indicate a need for
limiting the quantity of any or all classes of spearmint oil marketed,
the Committee subsequently recommends the establishment of a salable
quantity and allotment percentage for such class or classes of oil for
the forthcoming marketing year.
The salable quantity represents the total amount of each class of
spearmint oil that handlers may purchase from, or handle on behalf of,
producers during the marketing year. Each producer is allotted a
prorated share of the salable quantity by applying the allotment
percentage to that producer's allotment base for each applicable class
of spearmint oil. The producer allotment
[[Page 22203]]
base is each producer's quantified share of the spearmint oil market
based on a statistical representation of past spearmint oil production,
with accommodation for reasonable and normal adjustments to such base
as prescribed by the Committee and approved by USDA. Salable quantities
are established at levels intended to meet market requirements and to
establish orderly marketing conditions. Committee recommendations for
volume controls are made well in advance of the period in which the
regulations are to be effective, thereby allowing producers the chance
to adjust their production decisions accordingly.
Pursuant to authority in Sec. Sec. 985.50, 985.51, and 985.52 of
the order, the full eight-member Committee met on October 17, 2012, and
recommended salable quantities and allotment percentages for both
classes of oil for the 2013-2014 marketing year. The Committee, in a
vote of six members in favor and two members opposed, recommended the
establishment of a salable quantity and allotment percentage for Scotch
spearmint oil of 1,344,858 pounds and 65 percent, respectively. The two
members opposing the action felt that the proposed levels were too high
and favored establishing a smaller salable quantity and allotment
percentage for Scotch spearmint oil. For Native spearmint oil, the
Committee, in a vote of six members in favor and two members opposed,
recommended the establishment of a salable quantity and allotment
percentage of 1,432,189 pounds and 61 percent, respectively. Once
again, the two members opposing the action supported volume regulation
but favored an undetermined lower salable quantity and allotment
percentage for Native spearmint oil than what was proposed.
This action would limit the amount of spearmint oil that handlers
may purchase from, or handle on behalf of, producers during the 2013-
2014 marketing year, which begins on June 1, 2013. Salable quantities
and allotment percentages have been placed into effect each season
since the order's inception in 1980.
Class 1 (Scotch) Spearmint Oil
The U.S. production of Scotch spearmint oil is concentrated in the
Far West, which includes Washington, Idaho, Oregon, and a portion of
Nevada and Utah. Scotch type oil is also produced in seven other
States: Indiana, Michigan, Minnesota, Montana, North Dakota, South
Dakota, and Wisconsin. Additionally, Scotch spearmint oil is produced
outside of the U.S., with China and India being the largest global
competitors of domestic Scotch spearmint oil production.
The Far West's share of total global Scotch spearmint oil sales has
varied considerably over the past several decades, from as high as 72
percent in 1988, and as low as 27 percent in 2002. More recently, sales
of Far West Scotch spearmint oil have been approximately 50 percent of
world sales, and are expected to hold steady, or increase slightly, in
upcoming years. In addition, imports of foreign produced spearmint oil
into the U.S. have recently been trending down, while exports of
domestic spearmint oil have been trending up. Consequently, competition
in the domestic market from foreign produced spearmint oil has
decreased and the demand for Far West spearmint oil, both domestically
and abroad, has been very strong.
The Scotch spearmint industry is emerging from the very difficult
market environment that has existed in the past few years. Many of the
negative market components that were present from 2008 through 2011 in
the spearmint oil industry have corrected. During that period,
increased production and weakened market demand for Scotch spearmint
oil combined to create large stocks of excess oil held in reserve.
However, most recently, production of Scotch spearmint oil has
moderated, trade demand for Scotch spearmint oil has increased, and
excess inventory levels have dropped dramatically. In fact, production
of Scotch spearmint oil will need to increase during the 2013 season to
meet the anticipated market demand.
Although the spearmint oil industry continues to have some concerns
over the strength of the U.S. economy, marketing conditions for Scotch
spearmint oil have improved significantly. Lower inventories, steady to
increasing production, and strong projected demand are all positive
indicators of improving marketing conditions for Scotch spearmint oil.
Inventories, production, and market demand are now at levels that are
considered healthy for the industry.
Certain factors may be contributing to the recent increase in
demand for Far West Scotch spearmint oil. First, although China and
India have been significant suppliers of spearmint oil for the past 15
years, they have started to replace some spearmint acreage with other
mint varieties, such as Mentha arvensis (wild mint), and other non-mint
competing crops. In addition, both countries are utilizing more of
their domestically produced spearmint oil, removing oil that might
otherwise have been exported. Also, the Midwest region of the U.S. is
experiencing a significant reduction in Scotch spearmint oil
production. This decrease in regional production is partly due to
unexpected disease and weather related factors and partly the result of
competition from other alternate crops, such as corn and soybeans,
which are currently experiencing higher than average returns. Lastly,
improving global economic conditions have led to increased consumption
of spearmint flavored products.
The Committee estimates that the carry-in of Scotch spearmint oil
on June 1, 2013, the primary measure of excess supply, will be
approximately 16,570 pounds. This amount is down from the previous
year's estimate of 149,740 pounds and is lower than the minimum carry-
in quantity that the Committee would consider to be favorable.
Production of Scotch spearmint oil has decreased in recent years in
response to high Scotch spearmint oil inventory levels and below
average market demand. Production dropped from a high of 1,050,700
pounds in 2009 to an estimated 621,480 pounds in 2012. Total industry
production of Scotch spearmint oil is now below the level that the
Committee views as optimum. The Committee expects production will
increase during the 2013 season in response to the strong market demand
currently observed in the industry and the low inventory levels of
Scotch spearmint oil available to the market. The Committee considers
the current trends in supply and demand to be favorable, as it signals
an end to the continuing oversupply situation in Scotch spearmint oil
and the initiation of a period when supply and demand are in harmony.
Handlers indicate that increasing consumer demand for mint flavored
products provide a positive expectation for long-term increases in the
demand for Far West Scotch spearmint oil. Spearmint oil handlers have
indicated that demand for Scotch spearmint oil has been gaining
strength. Handlers who had projected the 2012-2013 trade demand for Far
West Scotch Spearmint oil to be in the range of 825,000 pounds to
1,100,000 pounds now expect it to increase to between 900,000 pounds to
1,200,000 pounds during the 2013-2014 marketing year.
Given the improving economic indicators for the Far West Scotch
spearmint oil industry outlined above, the Committee took a very
positive perspective into the discussion of establishing appropriate
salable quantities and allotment percentages for the upcoming season.
At the October 17,
[[Page 22204]]
2012, meeting, the Committee recommended the 2013-2014 Scotch spearmint
oil salable quantity of 1,344,858 pounds and an allotment percentage of
65 percent. The Committee utilized sales estimates for 2013-2014 Scotch
spearmint oil, as provided by several of the industry's handlers, as
well as historical and current Scotch spearmint oil production and
inventory statistics, to arrive at these recommendations. The volume
control levels recommended by the Committee represent an increase of
566,418 pounds and 27 percentage points over the previous year's
initial salable quantity and allotment percentage, reflecting a much
more positive assessment of the industry's current economic conditions.
The Committee estimates that about 1,200,000 pounds of Scotch
spearmint oil may be sold during the 2013-2014 marketing year. When
considered in conjunction with the estimated carry-in of 16,570 pounds
of Scotch spearmint oil on June 1, 2013, the recommended salable
quantity of 1,344,858 pounds results in a total available supply of
approximately 1,361,428 pounds of Scotch spearmint oil during the 2013-
2014 marketing year. The Committee estimates that carry-in of Scotch
spearmint oil into the 2014-2015 marketing year, which begins June 1,
2014, would be 161,428 pounds, an increase of 144,858 pounds from the
beginning of the 2013-2014 marketing year.
The Committee's stated intent in the use of marketing order volume
control regulations for Scotch spearmint oil is to keep adequate
supplies available to meet market needs and establish orderly marketing
conditions. With that in mind, the Committee developed its
recommendation for the proposed Scotch spearmint oil salable quantity
and allotment percentage for the 2013-2014 marketing year based on the
information discussed above, as well as the data outlined below.
(A) Estimated carry-in of Scotch spearmint oil on June 1, 2013--
16,570 pounds. This figure is the difference between the revised 2012-
2013 marketing year total available supply of 986,570 pounds and the
estimated 2012-2013 marketing year trade demand of 970,000 pounds.
(B) Estimated trade demand of Scotch spearmint oil for the 2013-
2014 marketing year--1,200,000 pounds. This figure is based on input
from producers at five Scotch spearmint oil production area meetings
held in late September and early October 2012, as well as estimates
provided by handlers and other meeting participants at the October 17,
2012, meeting. The average estimated trade demand provided at the five
production area meetings is 1,120,000 pounds, which is 35,000 pounds
less than the average of trade demand estimates submitted by handlers.
The average of Far West Scotch spearmint oil sales over the last five
years is 772,543 pounds.
(C) Salable quantity of Scotch spearmint oil required from the
2013-2014 marketing year production--1,183,430 pounds. This figure is
the difference between the estimated 2013-2014 marketing year trade
demand (1,200,000 pounds) and the estimated carry-in on June 1, 2013
(16,570 pounds). This figure represents the minimum salable quantity
that may be needed to satisfy estimated demand for the coming year with
no carryover.
(D) Total estimated allotment base of Scotch spearmint oil for the
2013-2014 marketing year--2,069,012 pounds. This figure represents a
one percent increase over the revised 2012-2013 total allotment base.
This figure is generally revised each year on June 1 due to producer
base being lost because of the bona fide effort production provisions
of Sec. 985.53(e). The revision is usually minimal.
(E) Computed Scotch spearmint oil 2013-2014 marketing year
allotment percentage--57.2 percent. This percentage is computed by
dividing the minimum required salable quantity (1,183,430 pounds) by
the total estimated allotment base (2,069,012 pounds).
(F) Recommended Scotch spearmint oil 2013-2014 marketing year
allotment percentage--65 percent. This is the Committee's
recommendation and is based on the computed allotment percentage (57.2
percent), the average of the computed allotment percentage figures from
the five production area meetings (55.8 percent), and input from
producers and handlers at the October 17, 2012, meeting. The
recommended 65 percent allotment percentage is also based on the
Committee's determination that the computed percentage (57.2 percent)
may not adequately supply the potential 2013-2014 Scotch spearmint oil
market.
(G) Recommended Scotch spearmint oil 2013-2014 marketing year
salable quantity--1,344,858 pounds. This figure is the product of the
recommended allotment percentage (65 percent) and the total estimated
allotment base (2,069,012 pounds).
(H) Estimated total available supply of Scotch spearmint oil for
the 2013-2014 marketing year--1,361,428 pounds. This figure is the sum
of the 2013-2014 recommended salable quantity (1,344,858 pounds) and
the estimated carry-in on June 1, 2013 (16,570 pounds).
Class 3 (Native) Spearmint Oil
The Native spearmint oil industry is experiencing market conditions
similar to those observed in the Scotch spearmint oil market.
Approximately 90 percent of U.S. production of Native spearmint oil is
produced within the Far West production area, thus domestic production
outside this area is not a major factor in the marketing of Far West
Native spearmint oil. This has been an attribute of U.S. production
since the order's inception. A minor amount of domestic Native
spearmint oil is produced outside of the Far West region in the States
of Indiana, Michigan, Minnesota, Montana, North Dakota, South Dakota,
and Wisconsin.
According to the Committee, very little true Native spearmint oil
is produced outside of the United States. However, India has been
producing an increasing quantity of spearmint oil with qualities very
similar to Native spearmint oil. Committee records show that in 1996
the Far West accounted for nearly 93 percent of the global sales of
Native or Native quality spearmint oil. By 2008, that share had
declined to only 48 percent. Since then, the percentage has been
increasing and Far West Native spearmint oil is estimated to be over 70
percent of global sales in 2012.
Despite the fact that Far West Native spearmint oil has been
gaining world market share, the industry has endured challenging
marketing conditions over the past five years. Overproduction, coupled
with a decrease in demand during the global economic recession, created
an excess inventory situation for Native spearmint oil that negatively
impacted the industry. However, most recently, production of Native
spearmint oil has moderated, trade demand for Native spearmint oil has
increased, and excess inventory levels have dropped to levels
considered optimal by the Committee.
When the Committee met on October 17, 2012, to consider volume
regulations for the upcoming 2013-2014 marketing year, the general
consensus within the Native spearmint oil industry was that marketing
conditions had improved over recent years and are expected to keep
improving into the future. The production of Far West Native spearmint
oil, which declined from a high of 1,453,896 pounds in 2009 to
approximately 1,210,260 pounds in 2012, is anticipated to remain steady
during the 2013 season. The Committee further expects that production
will be more in line with the projected demand
[[Page 22205]]
of Native spearmint oil in upcoming years.
Excess Native spearmint oil inventory, as measured by oil held in
reserve by producers and reported by the Committee, is estimated to be
379,006 pounds at the end of the 2012-2013 marketing year, down from a
recent high of 606,942 pounds in 2011. Reserve Native spearmint oil is
approaching the level that the Committee believes is optimum for the
industry.
In addition to an improved supply situation, demand for Far West
Native spearmint oil has been improving. Spearmint oil handlers, who
previously projected the 2012-2013 trade demand for Far West Native
spearmint oil in the range of 1,275,000 pounds to 1,450,000 pounds,
with an average of 1,350,000 pounds, have projected trade demand for
the 2013-2014 marketing period to be in the range of 1,200,000 pounds
to 1,500,000 pounds, with an average of 1,400,000.
Given the economic indicators for the Far West Native spearmint oil
industry outlined above, the Committee took an optimistic perspective
into the discussion of establishing appropriate salable quantities and
allotment percentages for the upcoming season.
As such, at the October 17, 2012, meeting, the Committee
recommended a 2013-2014 Native spearmint oil salable quantity of
1,432,189 pounds and an allotment percentage of 61 percent. The
Committee utilized Native spearmint oil sales estimates for 2013-2014,
as provided by several of the industry's handlers, as well as
historical and current Native spearmint oil market statistics to
establish these thresholds. These recommended volume control levels
represent an increase of 268,887 pounds and 11 percentage points over
the previous year's initially established salable quantity and
allotment percentage. Should these levels prove insufficient to
adequately supply the market, the Committee has the authority to
recommend an intra-seasonal increase, as it has done in the past two
marketing periods, if demand rises beyond expectations.
The Committee estimates that approximately 1,425,000 pounds of
Native spearmint oil may be sold during the 2013-2014 marketing year.
When considered in conjunction with the estimated carry-in of 43,411
pounds of Native spearmint oil on June 1, 2013, the recommended salable
quantity of 1,432,189 pounds results in an estimated total available
supply of 1,475,600 pounds of Native spearmint oil during the 2013-2014
marketing year. The Committee also estimates that carry-in of Native
spearmint oil at the beginning of the 2014-2015 marketing year will be
approximately 50,600 pounds.
The Committee's stated intent in the use of marketing order volume
control regulations for Native spearmint oil is to keep adequate
supplies available to meet market needs and establish orderly marketing
conditions. With that in mind, the Committee developed its
recommendation for the proposed Native spearmint oil salable quantity
and allotment percentage for the 2013-2014 marketing year based on the
information discussed above, as well as the data outlined below.
(A) Estimated carry-in of Native spearmint oil on June 1, 2013--
43,411 pounds. This figure is the difference between the revised 2012-
2013 marketing year total available supply of 1,418,411 pounds and the
estimated 2012-2013 marketing year trade demand of 1,375,000 pounds.
(B) Estimated trade demand of Native spearmint oil for the 2013-
2014 marketing year--1,425,000 pounds. This estimate is established by
the Committee and is based on input from producers at the six Native
spearmint oil production area meetings held in late September and early
October 2012, as well as estimates provided by handlers and other
meeting participants at the October 17, 2012, meeting. The average
estimated trade demand provided at the six production area meetings was
1,354,167 pounds, whereas the handler estimate ranged from 1,200,000
pounds to 1,500,000 pounds, and averaged 1,400,000 pounds. The average
of Far West Native spearmint oil sales over the last five years is
1,158,520 pounds.
(C) Salable quantity of Native spearmint oil required from the
2013-2014 marketing year production--1,381,589 pounds. This figure is
the difference between the estimated 2013-2014 marketing year trade
demand (1,425,000 pounds) and the estimated carry-in on June 1, 2013
(43,411 pounds). This is the minimum amount that the Committee believes
would be required to meet the anticipated 2013-2014 Native spearmint
oil trade demand.
(D) Total estimated allotment base of Native spearmint oil for the
2013-2014 marketing year--2,347,850 pounds. This figure represents a
one percent increase over the revised 2012-2013 total allotment base.
This figure is generally revised each year on June 1 due to producer
base being lost due to the bona fide effort production provisions of
Sec. 985.53(e). The revision is usually minimal.
(E) Computed Native spearmint oil 2013-2014 marketing year
allotment percentage--58.8 percent. This percentage is computed by
dividing the required salable quantity (1,381,589 pounds) by the total
estimated allotment base (2,347,850 pounds).
(F) Recommended Native spearmint oil 2013-2014 marketing year
allotment percentage--61 percent. This is the Committee's
recommendation based on the computed allotment percentage (58.8
percent), the average of the computed allotment percentage figures from
the six production area meetings (56.5 percent), and input from
producers and handlers at the October 17, 2012, meeting. The
recommended 61 percent allotment percentage is also based on the
Committee's determination that the computed percentage (58.8 percent)
may not adequately supply the potential 2013-2014 Native spearmint oil
market.
(G) Recommended Native spearmint oil 2013-2014 marketing year
salable quantity--1,432,189 pounds. This figure is the product of the
recommended allotment percentage (61 percent) and the total estimated
allotment base (2,347,850 pounds).
(H) Estimated available supply of Native spearmint oil for the
2013-2014 marketing year--1,475,600 pounds. This figure is the sum of
the 2013-2014 recommended salable quantity (1,432,189 pounds) and the
estimated carry-in on June 1, 2013 (43,411 pounds).
The salable quantity is the total quantity of each class of
spearmint oil that handlers may purchase from, or handle on behalf of,
producers during a marketing year. Each producer is allotted a share of
the salable quantity by applying the allotment percentage to the
producer's allotment base for the applicable class of spearmint oil.
The Committee's recommended Scotch and Native spearmint oil salable
quantities and allotment percentages of 1,344,858 pounds and 65
percent, and 1,432,189 pounds and 61 percent, respectively, are based
on the goal of establishing and maintaining market stability. The
Committee anticipates that this goal would be achieved by matching the
available supply of each class of Spearmint oil to the estimated demand
of such, thus avoiding extreme fluctuations in inventories and prices.
The proposed salable quantities are not expected to cause a
shortage of spearmint oil supplies. Any unanticipated or additional
market demand for spearmint oil which may develop during the marketing
year could be satisfied by an intra-seasonal increase in the salable
quantity. The
[[Page 22206]]
order makes the provision for intra-seasonal increases to allow the
Committee the flexibility to respond quickly to changing market
conditions. In addition, producers who produce more than their annual
allotments during the 2013-2014 marketing year may transfer such excess
spearmint oil to producers who have produced less than their annual
allotment, or, up until November 1, 2013, place it into the reserve
pool to be released in the future in accordance with market needs.
This proposed regulation, if adopted, would be similar to
regulations issued in prior seasons. The average allotment percentage
for the five most recent marketing years for Scotch spearmint oil is
38.8 percent, while the average allotment percentage for the same five-
year period for Native spearmint oil is 52.2 percent. Costs to
producers and handlers resulting from this proposed rule are expected
to be offset by the benefits derived from a stable market and improved
returns. In conjunction with the issuance of this proposed rule, USDA
has reviewed the Committee's marketing policy statement for the 2013-
2014 marketing year. The Committee's marketing policy statement, a
requirement whenever the Committee recommends volume regulation, fully
meets the intent of Sec. 985.50 of the order.
During its discussion of potential 2013-2014 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) 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.
Conformity with USDA's ``Guidelines for Fruit, Vegetable, and Specialty
Crop Marketing Orders'' has also been reviewed and confirmed.
The establishment of these 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 proposed rule
also provides producers with information on the amount of spearmint oil
that should be produced for the 2013-2014 season in order 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 action on small entities.
Accordingly, AMS has prepared this initial regulatory flexibility
analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
business subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and 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 36 producers of Scotch spearmint oil and
approximately 91 producers of Native spearmint oil in the 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 $7,000,000, 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 36 Scotch spearmint oil producers and 29 of
the 91 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 purposes of weed, insect, and
disease control. To remain economically viable with the added costs
associated with spearmint oil production, a majority of 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 from market
fluctuations. Such small producers generally need to market their
entire annual allotment and do not have income from 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 alternate 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 small producers 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 proposed rule would establish the quantity of spearmint oil
produced in the Far West, by class, that handlers may purchase from, or
handle on behalf of, producers during the 2013-2014 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 plan their spearmint
planting and harvesting to meet expected market needs. The provisions
of Sec. Sec. 985.50, 985.51, and 985.52 of the order authorize this
proposed rule.
Instability in the spearmint oil sub-sector of the mint industry is
much more likely to originate on the supply side than the demand side.
Fluctuations in yield and acreage planted from season-to-season tend to
be larger than fluctuations in the amount purchased by handlers.
Notwithstanding the recent global recession and the overall negative
impact on demand for consumer goods that utilize spearmint oil, demand
for spearmint oil tends to change slowly from year to year.
[[Page 22207]]
Demand for spearmint oil at the farm level is derived from retail
demand for spearmint-flavored products such as chewing gum, toothpaste,
and mouthwash. The manufacturers of these products are by far the
largest users of spearmint oil. However, spearmint flavoring is
generally a very minor component of the products in which it is used,
so changes in the raw product price have virtually no impact on retail
prices for those goods.
Spearmint oil production tends to be cyclical. Years of relatively
high production, with demand remaining reasonably stable, have led to
periods in which large producer stocks of unsold spearmint oil have
depressed producer prices for a number of years. Shortages and high
prices may follow in subsequent years, as producers respond to price
signals by cutting back production.
The significant variability of the spearmint oil market is
illustrated by the fact that the coefficient of variation (a standard
measure of variability; ``CV'') of Far West spearmint oil grower prices
for the period 1980-2011 (when the marketing order was in effect) is
0.19 compared to 0.34 for the decade prior to the promulgation of the
order (1970-79) and 0.48 for the prior 20-year period (1960-79). This
provides an indication of the price stabilizing impact of the marketing
order.
Production in the shortest marketing year was about 48 percent of
the 32-year average (1.897 million pounds from 1980 through 2011) and
the largest crop was approximately 162 percent of the 32-year average.
A key consequence is that, in years of oversupply and low prices, the
season average producer price of spearmint oil is below the average
cost of production (as measured by the Washington State University
Cooperative Extension Service.)
The wide fluctuations in supply and prices that result from this
cycle, which were even more pronounced before the creation of the
order, can create liquidity problems for some producers. The order was
designed to reduce the price impacts of the cyclical swings in
production. However, producers have been less able to weather these
cycles in recent years because of the increase in production costs.
While prices have been relatively steady, the cost of production has
increased to the extent that plans to plant spearmint may be postponed
or changed indefinitely. Producers are also enticed by the prices of
alternative crops and their lower cost of production.
In an effort to stabilize prices, the spearmint oil industry uses
the volume control mechanisms authorized under the order. This
authority allows the Committee to recommend a salable quantity and
allotment percentage for each class of oil for the upcoming marketing
year. The salable quantity for each class of oil is the total volume of
oil that producers may sell during the marketing year. The allotment
percentage for each class of spearmint oil is derived by dividing the
salable quantity by the total allotment base.
Each producer is then issued an annual allotment certificate, in
pounds, for the applicable class of oil, which is calculated by
multiplying the producer's allotment base by the applicable allotment
percentage. This is the amount of oil of each applicable class that the
producer can sell.
By November 1 of each year, the Committee identifies any oil that
individual producers have produced above the volume specified on their
annual allotment certificates. This excess oil is placed in a reserve
pool administered by the Committee.
There is a reserve pool for each class of oil that may not be sold
during the current marketing year unless USDA approves a Committee
recommendation to increase the salable quantity and allotment
percentage for a class of oil and make a portion of the pool available.
However, limited quantities of reserve oil are typically sold by one
producer to another producer to fill deficiencies. A deficiency occurs
when on-farm production is less than a producer's allotment. In that
case, a producer's own reserve oil can be sold to fill that deficiency.
Excess production (higher than the producer's allotment) can be sold to
fill other producers' deficiencies. All of these provisions need to be
exercised prior to November 1 of each year.
In any given year, the total available supply of spearmint oil is
composed of current production plus carryover stocks from the previous
crop. The Committee seeks to maintain market stability by balancing
supply and demand, and to close the marketing year with an appropriate
level of carryout. If the industry has production in excess of the
salable quantity, then the reserve pool absorbs the surplus quantity of
spearmint oil, which goes unsold during that year, unless the oil is
needed for unanticipated sales.
Under its provisions, the order may attempt to stabilize prices by
(1) limiting supply and establishing reserves in high production years,
thus minimizing the price-depressing effect that excess producer stocks
have on unsold spearmint oil, and (2) ensuring that stocks are
available in short supply years when prices would otherwise increase
dramatically. The reserve pool stocks, which are increased in large
production years, are drawn down in years where the crop is short.
An econometric model was used to assess the impact that volume
control has on the prices producers receive for their commodity.
Without volume control, spearmint oil markets would likely be over-
supplied. This could result 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 Committee estimated trade demand for the 2013-2014 marketing
year for both classes of oil at 2,625,000 pounds, and that the expected
combined salable carry-in will be 59,981 pounds. This results in a
combined required salable quantity of 2,565,019 pounds. With volume
control, sales by producers for the 2013-2014 marketing year would be
limited to 2,777,047 pounds (the recommended salable quantity for both
classes of spearmint oil).
The recommended allotment percentages, upon which 2013-2014
producer allotments are based, are 65 percent for Scotch and 61 percent
for Native. Without volume controls, producers would not be limited to
these allotment levels, and could produce and sell additional
spearmint. The econometric model estimated a $1.35 decline in the
season average producer price per pound (from both classes of spearmint
oil) resulting from the higher quantities that would be produced and
marketed without volume control. The surplus situation for the
spearmint oil market that would exist without volume controls in 2013-
2014 also would likely dampen prospects for improved producer prices in
future years because of the buildup in stocks.
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.
The Committee discussed alternatives to the recommendations
contained in this proposed rule for both classes of spearmint oil. The
Committee discussed and rejected the idea of recommending that there
not be any volume regulation for both classes of spearmint oil because
of the severe price-depressing effects that would occur without volume
control.
[[Page 22208]]
After computing the initial 57.2 percent Scotch spearmint oil
allotment percentage, the Committee considered various alternative
levels of volume control for Scotch spearmint oil. Given the moderately
improving marketing conditions, there was consensus that the Scotch
spearmint oil allotment percentage for 2013-2014 should be more than
the percentage established for the 2012-2013 marketing year (38
percent). After considerable discussion, the eight-member committee, on
a vote of six members in favor and two members opposed, determined that
1,344,858 pounds and 65 percent would be the most effective Scotch
spearmint oil salable quantity and allotment percentage, respectively,
for the 2013-2014 marketing year. The two dissenting members felt that
the salable quantity and allotment percentage should be set at an
unidentified lower level.
The Committee was also able to reach a consensus regarding the
level of volume control for Native spearmint oil. After first
determining the computed allotment percentage at 58.8 percent, the
Committee, in a vote of six members in favor and two members opposed,
recommended 1,432,189 pounds and 61 percent for the effective Native
spearmint oil salable quantity and allotment percentage, respectively,
for the 2013-2014 marketing year. The two dissenting members felt that
the salable quantity and allotment percentage should be set at an
unidentified lower level.
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 quantity and allotment percentage levels recommended
would achieve the objectives sought.
Without any regulations in effect, the Committee believes the
industry would return to the pronounced cyclical price patterns that
occurred prior to the order, and that prices in 2013-2014 could decline
substantially below current levels.
According to the Committee, the recommended salable quantities and
allotment percentages are expected to facilitate the goal of
establishing orderly marketing conditions for Far West spearmint oil.
As previously stated, annual salable quantities and allotment
percentages have been issued for both classes of spearmint oil since
the order's inception.
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 the Office of Management and Budget (OMB) and
assigned OMB No. 0581-0178, Generic Vegetable and Specialty Crops. No
changes in those requirements as a result of this action are necessary.
Should any changes become necessary, they would be submitted to OMB for
approval.
This proposed rule would establish the salable quantities and
allotment percentages of Class 1 (Scotch) spearmint oil and Class 3
(Native) spearmint oil produced in the Far West during the 2013-2014
marketing year. Accordingly, this proposed rule 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. Furthermore, 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
17, 2012, meeting was a public meeting and all entities, both large and
small, were able to express views on this issue. Finally, interested
persons are invited to submit comments on this proposed rule, including
the regulatory and informational impacts of this action on small
businesses.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at:
www.ams.usda.gov/MarketingOrdersSmallBusinessGuide. Any questions about
the compliance guide should be sent to Jeffrey Smutney at the
previously mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
A 15-day comment period is provided to allow interested persons to
respond to this proposed rule. Fifteen days is deemed appropriate
because: (1) The 2013-2014 fiscal period begins on June 1, 2013, and a
final determination on the salable quantities and allotment percentages
should be made prior to handlers purchasing from, or handling on behalf
of, producers any oil for the ensuing marketing year; and (2) handlers
are aware of this action, which was recommended by the Committee at a
public meeting and is similar to other salable quantities and allotment
percentages issued in past years.
Pursuant to 5 U.S.C. 553, it is also found that good cause exists
for not postponing the effective date of this action until thirty days
after publication in the Federal Register because a final determination
of salable quantities and allotment percentages should be in effect
prior to the start of the 2013-14 fiscal period, which begins June 1,
2013.
List of Subjects in 7 CFR Part 985
Marketing agreements, Oils and fats, Reporting and recordkeeping
requirements, Spearmint oil.
For the reasons set forth in the preamble, 7 CFR Part 985 is
proposed to be amended as follows:
PART 985--MARKETING ORDER REGULATING THE HANDLING OF SPEARMINT OIL
PRODUCED IN THE FAR WEST
0
1. The authority citation for 7 CFR Part 985 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. A new Sec. 985.232 is added to read as follows:
Note: This section will not appear in the Code of Federal
Regulations.
Sec. 985.232 Salable quantities and allotment percentages--2013-2014
marketing year.
The salable quantity and allotment percentage for each class of
spearmint oil during the marketing year beginning on June 1, 2013,
shall be as follows:
(a) Class 1 (Scotch) oil--a salable quantity of 1,344,858 pounds
and an allotment percentage of 65 percent.
[[Page 22209]]
(b) Class 3 (Native) oil--a salable quantity of 1,432,189 pounds
and an allotment percentage of 61 percent.
Dated: April 9, 2013.
David R. Shipman,
Administrator, Agricultural Marketing Service.
[FR Doc. 2013-08681 Filed 4-12-13; 8:45 am]
BILLING CODE 3410-02-P