Proposed Rule2024-08149
Tart Cherries Grown in the States of Michigan, et al.; Free and Restricted Percentages for the 2023-24 Crop Year
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Published
April 19, 2024
Issuing agencies
Agriculture DepartmentAgricultural Marketing Service
Abstract
This proposed rule would implement a recommendation from the Cherry Industry Administrative Board (Board) to establish free and restricted percentages for the 2023-24 crop year under the Federal marketing order for tart cherries grown in the states of Michigan, New York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin. This action would establish the proportion of tart cherries from the 2023-24 crop which may be handled in commercial outlets. This action should stabilize marketing conditions by adjusting supply to meet market demand and help improve grower returns.
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[Federal Register Volume 89, Number 77 (Friday, April 19, 2024)]
[Proposed Rules]
[Pages 28682-28687]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-08149]
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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. 89, No. 77 / Friday, April 19, 2024 /
Proposed Rules
[[Page 28682]]
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 930
[Doc. No. AMS-SC-23-0074]
Tart Cherries Grown in the States of Michigan, et al.; Free and
Restricted Percentages for the 2023-24 Crop Year
AGENCY: Agricultural Marketing Service, Department of Agriculture
(USDA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: This proposed rule would implement a recommendation from the
Cherry Industry Administrative Board (Board) to establish free and
restricted percentages for the 2023-24 crop year under the Federal
marketing order for tart cherries grown in the states of Michigan, New
York, Pennsylvania, Oregon, Utah, Washington, and Wisconsin. This
action would establish the proportion of tart cherries from the 2023-24
crop which may be handled in commercial outlets. This action should
stabilize marketing conditions by adjusting supply to meet market
demand and help improve grower returns.
DATES: Comments must be received by May 20, 2024.
ADDRESSES: Interested persons are invited to submit written comments
concerning this proposed rule. Comments can be sent to the Docket
Clerk, Market Development Division, Specialty Crops Program, AMS, USDA,
1400 Independence Avenue SW, STOP 0237, Washington, DC 20250-0237.
Comments can also be sent to the Docket Clerk electronically by Email:
<a href="/cdn-cgi/l/email-protection#1954786b727c6d70777e566b7d7c6b5a7674747c776d596c6a7d78377e766f"><span class="__cf_email__" data-cfemail="763b17041d13021f1811390412130435191b1b131802360305121758111900">[email protected]</span></a> or via the internet at: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Comments should reference the document number, the
date and page number of this issue of the Federal Register. Comments
submitted in response to this proposed rule will be included in the
record and will be made available to the public and can be viewed at:
<a href="https://www.regulations.gov">https://www.regulations.gov</a>. 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: Steven W. Kauffman, Marketing
Specialist, or Christian D. Nissen, Chief, Southeast Region Branch,
Market Development Division, Specialty Crops Program, AMS, USDA;
Telephone: (863) 324-3375, or Email: <a href="/cdn-cgi/l/email-protection#a4f7d0c1d2c1ca8aefc5d1c2c2c9c5cae4d1d7c0c58ac3cbd2"><span class="__cf_email__" data-cfemail="d685a2b3a0b3b8f89db7a3b0b0bbb7b896a3a5b2b7f8b1b9a0">[email protected]</span></a> or
<a href="/cdn-cgi/l/email-protection#3a79524853494e535b5414745349495f547a4f495e5b145d554c"><span class="__cf_email__" data-cfemail="e4a78c968d97908d858acaaa8d9797818aa491978085ca838b92">[email protected]</span></a>.
Small businesses may request information on complying with this
regulation by contacting Richard Lower, Market Development Division,
Specialty Crops Program, AMS, USDA, 1400 Independence Avenue SW, STOP
0237, Washington, DC 20250-0237; Telephone: (202) 720-8085, or Email:
<a href="/cdn-cgi/l/email-protection#f8aa919b90998a9cd6b4978f9d8ab88d8b9c99d69f978e"><span class="__cf_email__" data-cfemail="1b497278737a697f3557746c7e695b6e687f7a357c746d">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: This action, pursuant to 5 U.S.C. 553,
proposes to amend regulations issued to carry out a marketing order as
defined in 7 CFR 900.2(j). This proposed rule is issued under Marketing
Order No. 930, as amended (7 CFR part 930), regulating the handling of
tart cherries produced in the states of Michigan, New York,
Pennsylvania, Oregon, Utah, Washington, and Wisconsin. Part 930
(referred to as the ``Order'') is effective under the Agricultural
Marketing Agreement Act of 1937, as amended (7 U.S.C. 601-674),
hereinafter referred to as the ``Act.'' The Board locally administers
the Order and is comprised of growers and handlers of tart cherries
operating within the production area, and a public member.
The Agricultural Marketing Service (AMS) is issuing this proposed
rule in conformance with Executive Orders 12866, 13563, and 14094.
Executive Orders 12866 and 13563 direct agencies to assess all costs
and benefits of available regulatory alternatives and, if regulation is
necessary, to select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, distributive impacts, and equity). Executive Order 13563
emphasizes the importance of quantifying both costs and benefits,
reducing costs, harmonizing rules, and promoting flexibility. Executive
Order 14094 reaffirms, supplements, and updates Executive Order 12866
and further directs agencies to solicit and consider input from a wide
range of affected and interested parties through a variety of means.
This proposed action falls within a category of regulatory actions that
the Office of Management and Budget (OMB) exempted from Executive Order
12866 review.
This proposed rule has been reviewed under Executive Order 13175--
Consultation and Coordination with Indian Tribal Governments, which
requires Federal agencies to consider whether their rulemaking actions
would have Tribal implications. AMS has determined that this proposed
rule is unlikely to have substantial direct effects on one or more
Indian Tribes, on the relationship between the Federal Government and
Indian Tribes, or on the distribution of power and responsibilities
between the Federal Government and Indian Tribes.
This proposed rule has been reviewed under Executive Order 12988--
Civil Justice Reform. Under the Order provisions now in effect, free
and restricted percentages may be established for tart cherries for the
2023-24 crop year. This proposed rule would establish free and
restricted percentages for the 2023-2024 crop year, beginning July 1,
2023, through June 30, 2024.
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 the U.S. Department
of Agriculture (USDA) a petition stating that the marketing order, any
provision of the marketing order, or any obligation imposed in
connection with the marketing order is not in accordance with law and
request a modification of the marketing order or to be exempted
therefrom. Such 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 no later than 20 days
after the date of the entry of the ruling.
This proposed rule would establish the proportion of tart cherries
from the 2023-24 crop which may be handled at 94 percent free and 6
percent restricted.
[[Page 28683]]
The Secretary of Agriculture (Secretary) has determined that
designating free and restricted percentages of tart cherries for the
2023-24 crop year would effectuate the declared policy of the Act to
stabilize marketing conditions by adjusting supply to meet market
demand and help improve grower returns. These recommendations were made
by the Board at a meeting on September 14, 2023, and reaffirmed at a
meeting on December 14, 2023.
Section 930.51(a) provides the Secretary authority to regulate
volume by designating free and restricted percentages for any tart
cherries acquired by handlers in a given crop year. Section 930.50
prescribes procedures for computing an optimum supply based on sales
history and for calculating these free and restricted percentages. Free
percentage volume may be shipped to any market, while restricted
percentage volume must be held by handlers in a primary or secondary
reserve, or be diverted, or used for exempt purposes as prescribed in
Sec. Sec. 930.159 and 930.162. Exempt purposes include, in part, the
development of new products, sales into new markets, the development of
export markets, and charitable contributions. Sections 930.55 through
930.57 prescribe procedures for inventory reserve. For cherries held in
reserve, handlers would be responsible for storage and would retain
title of the tart cherries.
Under section 930.52, only districts in which the average annual
production of cherries over the prior three years has exceeded six
million pounds are subject to volume regulation, and any district
producing a crop that is less than 50 percent of its annual average
processed production in the previous five years would be exempt from
any volume regulation. The regulated districts for the 2023-24 crop
year would be: District 1--Northern Michigan; District 2--Central
Michigan; District 3--Southern Michigan; District 4--New York; District
7--Utah; District 8--Washington; and District 9--Wisconsin. Districts 5
and 6 (Oregon and Pennsylvania, respectively) would not be regulated
for the 2023-24 season.
Demand for tart cherries and tart cherry products tends to be
relatively stable despite the variance in production volume that
industry may experience from year to year. Additionally, once
processed, tart cherries can be stored and carried over from crop year
to crop year, further impacting supply. The Board is aware of this
economic relationship and focuses on using the volume control
provisions in the marketing order to balance supply and demand to
stabilize industry returns.
Pursuant to section 930.50, the Board meets on or about July 1 to
review sales data, inventory data, current crop forecasts, and market
conditions for the upcoming season and, if necessary, to recommend
preliminary free and restricted percentages if anticipated supply would
exceed demand. After harvest is complete, but no later than September
15, the Board meets again to update its calculations using actual
production data, consider any necessary adjustments to the preliminary
percentages, and determine if final free and restricted percentages
should be recommended to the Secretary.
The Board uses sales history, inventory, and production data to
determine whether a surplus exists and how much volume should be
restricted to maintain optimum supply. The optimum supply represents
the desirable volume of tart cherries that should be available for sale
in the coming crop year. Optimum supply is defined as the average free
sales of the prior three years plus desirable carry-out inventory.
Desirable carry-out is the amount of fruit needed by the industry to be
carried into the succeeding crop year to meet market demand until the
new crop is available. Desirable carry-out is recommended by the Board
after considering market circumstances and needs. Section 930.151(b)
specifies that desirable carry-out can range from zero to a maximum of
100 million pounds.
In addition, Sec. 930.50(g) specifies that in years when
restricted percentages are established, the Board shall make available
tonnage equivalent to an additional 10 percent of the average sales of
the prior three years for market expansion. This requirement is in
USDA's ``Guidelines for Fruit, Vegetable, and Specialty Crop Marketing
Orders'' (<a href="https://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders">https://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders</a>) which specifies that 110
percent of recent years' sales should be made available to primary
markets each season before recommendations for volume regulation are
approved.
After the Board determines the optimum supply, desirable carry-out,
and market growth factor, it must examine the current year's available
volume to determine whether an oversupply might occur. Available volume
includes carry-in inventory (any inventory available at the beginning
of the season) along with that season's production. If production plus
the carry-in inventory is greater than the optimum supply (3-year sales
average plus the targeted carry-out), then the difference is considered
surplus. The ten percent market expansion factor and any economic
adjustments recommended by the Board are then subtracted from this
surplus number to arrive at an adjusted surplus. This adjusted surplus
tonnage is divided by the sum of production in the regulated districts
to reach a restricted percentage. This percentage must be held in
reserve or used for approved diversion activities, such as exports, new
products, or new market activities.
The Board met on June 22, 2023, and computed an optimum supply of
279.2 million pounds for the 2023-24 crop year using the average of
free sales for the three previous seasons plus the desirable carry-out.
To determine the carry-out figure, the Board discussed a range of
alternatives. One member recommended a carry-out value of 85 million
pounds, noting he did not think 100 million pounds was necessary to
keep the markets supplied. Another member suggested a 70-million-pound
carry-out and stated the industry does not need all those cherries in
inventory and there will be fewer growers in the future if the market
is oversupplied. Other members were concerned that 70 million pounds
was too low to satisfy the demand prior to the new crop being
available. Discussion also included that the carryover should be enough
to supply the needs of the industry in case of a disaster and that the
carryover should also reflect the increased number of tart cherry
products now supplied to the market. Other members noted that more
supply is also needed due to new food safety requirements being
implemented. After considering the alternatives, the Board determined a
carry-out of 85 million pounds would be enough to supply the industry's
needs at the beginning of the next season.
The Board subtracted the carry-in inventory available on June 1st
of 137.2 million pounds from the optimum supply to calculate the
production quantity needed from the 2023-24 crop to meet optimum
supply. This number, 142 million pounds, was subtracted from the
Board's estimated 2023-24 total production of 175.2 million pound (from
regulated and unregulated districts) to calculate a surplus of 33.2
million pounds of tart cherries. The Board also complied with the
market expansion factor requirement by removing 19.4 million pounds
(average sales for prior three years of 194.2 million times 10 percent)
from the surplus. The adjusted surplus of 13.8 million pounds was then
divided by the expected production in the regulated districts (173.5
million pounds) to reach
[[Page 28684]]
a preliminary restricted percentage of 8 percent for the 2023-24 crop
year.
The Board then discussed whether this calculation would supply
enough cherries to grow sales and fulfill orders that have not yet
shipped. Some members stated that the Board should account for some
large late season demand purchases by the USDA, which would account for
approximately 26 million pounds raw product equivalent. After
discussing multiple motions for an economic adjustment ranging from 0
to 26 million pounds, the Board did not recommend a preliminary
economic adjustment at the June meeting. Without an economic
adjustment, the preliminary restricted percentage remained at 8
percent. With this relatively small restriction, the Board did not
anticipate significant orchard diversion.
The Board met again on September 14, 2023, to consider final volume
regulation percentages for the 2023-24 season. The final percentages
are based on the Board's reported production figures and the supply and
demand information available in September.
The total production for the 2023-24 season reported at the
September meeting was 202.7 million pounds. This exceeded the Board's
June production estimate by 27.5 million pounds. In addition, growers
diverted 6.86 million pounds in the orchard, lowering the available
production for market. As a result, 195.8 million pounds of production
would be available to the market, 193.4 million pounds of which are in
the districts subject to volume regulation. The Board accounted for the
recommended desirable carry-out and economic adjustment, as well as the
market growth factor, and recalculated the restricted percentage using
the actual production numbers.
The Board subtracted the carry-in figure used in June of 137.2
million pounds, from the optimum supply of 279.2 million pounds to
determine 142 million pounds of 2023-24 production would be necessary
to reach optimum supply. The Board subtracted the 142 million pounds
from the actual production of 202.7 million pounds, resulting in a
surplus of 60.7 million pounds of tart cherries.
At its June meeting, the Board did not recommend making an economic
adjustment of the optimum supply calculation to address unexpected
factors that could have a bearing on the marketing of tart cherries.
However, in September, following another discussion of a late seasonal
purchase made by USDA, and the possible impact on the available supply,
the Board recommended an economic adjustment of 30 million pounds to
ensure sufficient inventory was available to meet demand.
The Board also discussed the impact of imported tart cherries on
the domestic market. Imports have been an important topic of discussion
for the Board when considering preliminary and final volume
recommendations since the demand for tart cherries is inelastic. In
June, the Board received a presentation indicating tart cherry imports
were only approximately 1/7th of the volume previously reported. At the
September meeting, AMS verified the industry report and confirmed that
tart cherry imports were considerably less than previously reported. As
a result, the Board did not recommend making an additional economic
adjustment based on imports.
The calculated surplus was reduced by subtracting the economic
adjustment of 30 million pounds from the September meeting and the
market growth factor of 19.4 million pounds, resulting in an adjusted
surplus of 11.25 million pounds. The Board then divided the adjusted
surplus by the available production of 193.4 million pounds (202.66
million pounds minus 6.86 million pounds of in-orchard diversion minus
2.44 million pounds from unregulated districts) in the regulated
districts to calculate a restricted percentage of 5.8 percent. The
Board rounded this number up, and recommended a 6 percent restriction
(11.6 million pounds) with a corresponding free percentage of 94
percent (181.8 million pounds) in the regulated districts for the 2023-
24 crop year, as outlined in the following table from the September
meeting:
------------------------------------------------------------------------
Millions of
pounds
------------------------------------------------------------------------
September Calculations:
(1) Average sales of the prior three years.......... 194.2
(2) Desirable carry-out............................. 85
---------------
(3) Optimum supply calculated by the Board (item 1 279.2
plus item 2).......................................
(4) Carry-in as of July 1, 2023..................... 137.2
(5) Adjusted optimum supply (item 3 minus item 4)... 142
(6) Board reported production....................... 202.7
(7) Surplus (item 6 minus item 5)................... 60.7
(8) Total economic adjustments...................... 30
(9) Market growth factor............................ 19.4
(10) Adjusted Surplus (item 7 minus items 8 and 9).. 11.25
------------------------------------------------------------------------
(11) Production in regulated districts.............. 200.2
(12) In-Orchard Diversion........................... 6.86
---------------
(13) Production minus in-orchard diversion.......... 193.4
------------------------------------------------------------------------
Final Percentages: Percent
---------------
Restricted (item 10 divided by item 13 x 100)....... 6
Free (100 minus restricted percentage).............. 94
------------------------------------------------------------------------
The final restriction of 6 percent is lower than the preliminary
restriction percentage of 8 percent. The change is due to the increase
in production of 27.5 million pounds more in total production above the
June estimate, and the 30-million-pound economic adjustment the Board
made in September. The desired carry-out remained the same at 85
million pounds.
After the September meeting, industry reported an additional 3.24
million pounds of production that was not accounted for at the
September meeting. The Board met again on December 14,
[[Page 28685]]
2023, and reviewed the impact of this additional production on the free
and restricted percentages recommended at the September meeting. The
inclusion of the additional 3.24 million pounds would increase the
surplus from approximately 60.7 to 63.9 million pounds. Given no
further changes to the other numbers incorporated in the September
calculation, this surplus change would increase the restricted
percentage to 7.4 percent.
The Board discussed maintaining the final restriction at 6 percent
as recommended in September. Members recognized that this would relieve
the industry from the burden of having to meet an increased reserve
requirement of 1.4 percent more (7.4%-6% = 1.4%). Since the industry
makes business decisions based on the June estimates and the final
recommendation from September, a late season increase to the reserve
requirement could have a negative impact on some industry members.
After discussing the possible impact of the increased production, the
Board unanimously recommended increasing the economic adjustment by the
3.24 million pounds of additional production to offset its impact on
available supply and to leave the percentages recommended in September
in place with 94 percent free and 6 percent restricted for the 2023-24
season.
With these changes, the total production increased from 202.7
million pounds to 205.9 million pounds and the surplus rose to 63.9
million pounds. The economic adjustment shifted from 30 million pounds
to 33.24 million pounds, balancing out the additional surplus. Using
the new production number and the revised economic adjustment to
recalculate the restricted percentage, and rounding up, results in a 6
percent restriction percentage as recommended at the September meeting,
as outlined in the following table from the December meeting:
------------------------------------------------------------------------
Millions of
pounds
------------------------------------------------------------------------
Final Calculations:
(1) Average sales of the prior three years.......... 194.2
(2) Desirable carry-out............................. 85
---------------
(3) Optimum supply calculated by the Board (item 1 279.2
plus item 2).......................................
(4) Carry-in as of July 1, 2023..................... 137.2
(5) Adjusted optimum supply (item 3 minus item 4)... 142
(6) Board reported production....................... 205.9
(7) Surplus (item 6 minus item 5).................. 63.9
(8) Total economic adjustments...................... 33.24
(9) Market growth factor............................ 19.4
(10) Adjusted Surplus (item 7 minus items 8 and 9).. 11.25
------------------------------------------------------------------------
(11) Production in regulated districts.............. 203.46
(12) In-Orchard Diversion........................... 6.86
---------------
(13) Production minus in-orchard diversion.......... 196.6
------------------------------------------------------------------------
Final Percentages: Percent
---------------
Restricted (item 10 divided by item 13 x 100)....... 6
Free (100 minus restricted percentage).............. 94
------------------------------------------------------------------------
Establishing free and restricted percentages is an attempt to bring
supply and demand into balance. If the primary market is oversupplied
with cherries, grower prices decline substantially. Restricted
percentages have benefited grower returns and helped stabilize the
market as compared to those seasons prior to the implementation of the
Order. The Board, based on its discussion of this issue and the result
of the above calculations, believes the available information indicates
a restricted percentage should be established for the 2023-24 crop year
to avoid oversupplying the market with tart cherries.
Consequently, the Board recommended final percentages of 94 percent
free and 6 percent restricted by a vote of 12 in favor, and 4 opposed
on September 14, 2023, but later unanimously recommended the same
percentages at the meeting on December 14, 2023. The Board could meet
during the crop year, and if conditions so warranted, recommend the
release of additional volume. The Secretary finds, from the
recommendation and supporting information supplied by the Board, that
designating final percentages of 94 percent free and 6 percent
restricted would tend to effectuate the declared policy of the Act, and
so designates these percentages.
Initial Regulatory Flexibility Analysis
Pursuant to requirements set forth in the Regulatory Flexibility
Act (RFA) (5 U.S.C. 601-612), the AMS has considered the economic
impact of this proposed rule on small entities. Accordingly, AMS has
prepared this initial regulatory flexibility analysis.
The purpose of the RFA is to fit regulatory actions to the scale of
businesses subject to such actions in order that small businesses will
not be unduly or disproportionately burdened. Marketing orders issued
pursuant to the Act, and rules issued thereunder, are unique in that
they are brought about through group action of essentially small
entities acting on their own behalf.
There are approximately 400 growers of tart cherries in the
regulated area and approximately 30 handlers of tart cherries who are
subject to regulation under the Order. At the time this analysis was
prepared, the Small Business Administration (SBA) defined small
agricultural growers of tart cherries as those having annual receipts
equal to or less than $3.5 million (NAICS code--111339, Other Noncitrus
Fruit Farming), and small agricultural service firms, including
handlers, are defined as those whose annual receipts are equal to or
less than $34 million (NAICS code 11514, Postharvest Crop Activities).
(13 CFR 121.201).
According to data from the National Agricultural Statistics Service
(NASS), the 2022-2023 season average grower price for tart cherries
utilized for processing was approximately $0.218
[[Page 28686]]
per pound. With total utilization for processing at 241.6 million
pounds for the 2022-23 season, the total 2022-23 value of the crop
utilized for processing is estimated at $52.7 million. Dividing the
crop value by the estimated number of growers (400) yields an estimated
average annual receipts per grower of approximately $132,000. This is
well below the $3.5 million SBA threshold for small growers.
An estimate of the season average price per pound received by
handlers for processed tart cherries was derived from USDA's purchases
of dried tart cherries for feeding programs in 2023, which had an
average price of $4.72 per pound. The dried cherry price was converted
to a raw product equivalent price of $0.94 per pound at an industry
recognized ratio of five to one. Based on utilization, this price
represents a good estimate of the price for processed cherries.
Multiplying this price by total processed utilization of 241.5 million
pounds results in an estimated handler-level tart cherry value of $227
million. Dividing this figure by the number of handlers ($227 million
divided by 30 handlers) yields estimated average annual receipts per
handler of approximately $7.6 million, which is well below the SBA
threshold of $34 million for small agricultural service firms. Assuming
a normal distribution, the majority of growers and handlers of tart
cherries may be classified as small entities.
The tart cherry industry in the United States is characterized by
wide annual fluctuations in production. According to NASS, the pounds
of tart cherry production utilized for processing for the years 2019
through 2022 were 234 million, 138 million, 171 million, and 241
million, respectively. Because of these fluctuations, supply and demand
for tart cherries are rarely in balance.
Demand for tart cherries is inelastic, meaning changes in price
have a minimal effect on total sales volume. However, prices are very
sensitive to changes in supply, and grower prices vary widely in
response to the large swings in annual supply. Grower prices per pound
for processed utilization have ranged from a low of $0.07 in 1987 to a
high of $0.59 per pound in 2012 when a weather event substantially
reduced supply. Grower prices per pound for processed utilization over
the most recent three years (2020 through 2022) were $0.38, $0.50, and
$0.22, respectively.
Because of this relationship between supply and price,
oversupplying the market with tart cherries would have a sharp negative
effect on prices, driving down grower returns. Aware of this economic
relationship, the Board focuses on using the volume control authority
in the Order to align supply with demand and stabilize industry
returns. This authority allows the industry to set free and restricted
percentages to bring supply and demand into balance. Free percentage
cherries can be marketed by handlers to any outlet, while restricted
percentage volume must be held by handlers in reserve, diverted, or
used for exempted purposes.
This proposal would establish 2023-24 crop year percentages of 94
percent free and 6 percent restricted. These percentages should
stabilize marketing conditions by adjusting supply to meet market
demand and help improve grower returns. The proposal would regulate
tart cherries handled in Michigan, Utah, Washington, Wisconsin, and New
York. The authority for this proposed action is provided in Sec. Sec.
930.50, 930.51(a), and 930.52. The Board recommended this action at
meetings on September 14, 2023, and December 14, 2023.
This proposal would result in some fruit being diverted from the
primary domestic markets as authorized in the Order's marketing policy
in Sec. 930.50. However, as mentioned earlier, the USDA's ``Guidelines
for Fruit, Vegetable, and Specialty Crop Marketing Orders'' (<a href="https://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders">https://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-marketing-orders</a>) specify that 110 percent of recent years' sales
should be made available to primary markets each crop year per Sec.
930.50(g), before recommendations for volume regulation are approved.
Under this proposal, the available quantity of 324.4 million pounds
(Free production of 184.8 million plus a carry-in of 137.2 million plus
2.4 million pounds unregulated) would be 167 percent of the average
sales for the last three years (194.2 million pounds).
In addition, there are secondary uses available for restricted
fruit, including the development of new products, sales into new
markets, the development of export markets, and being placed in
reserve. While these alternatives may provide different levels of
return than the sales to primary markets, they play an important role
for the industry. The areas of new products, new markets, and the
development of export markets utilize restricted fruit to develop and
expand the markets for tart cherries.
Placing tart cherries into reserves is also a key part of balancing
supply and demand. Although handlers bear the handling and storage
costs for fruit in reserve, reserves stored in large crop years can be
used to supplement supplies in short crop years. The reserves help the
industry to mitigate the impact of oversupply in large crop years,
while allowing the industry to supply markets in years when production
falls below demand. During the 2020-21 season, the Board voted to
release all fruit in the reserve into the primary market to increase
supply.
In considering the establishment of free and restricted
percentages, the Board recommended a carry-out of 85 million pounds to
help ensure sufficient product to meet demand until availability of the
following year's crop and to allow for inventory to span the lead-time
on processing new products. The Board also recommended a demand
adjustment of 33.24 million pounds. These numbers, along with carry-in,
production in the unregulated districts, and free tonnage from the
regulated districts, would make 324.4 million pounds of fruit available
for the domestic market. This amount exceeds the 317.4 million pounds
available in the previous season when the industry did not regulate the
volume on the market. Even with the recommended restriction, the
domestic market would have an ample supply of tart cherries. Further,
should marketing conditions change, and market demand exceed existing
supplies, the Board could meet and recommend the release of additional
reserves up to 11.8 million pounds of tart cherries. Consequently, it
is not anticipated that this proposal would unduly burden growers or
handlers.
While this proposal could result in some additional costs to the
industry, these costs would be outweighed by the benefits. The purpose
of setting restricted percentages is to attempt to bring supply and
demand into balance. If the primary market (domestic) is oversupplied
with cherries, grower prices decline substantially. Without volume
control, the primary market would likely be oversupplied, resulting in
lower grower prices.
An AMS econometric model used to assess the impact volume control
has on the price growers receive for their product estimated that
volume control would have a positive impact on grower returns for this
crop year. With volume control, grower prices are estimated to be about
nine tenths of a cent higher than without restrictions. In addition,
absent volume control, the industry could start to build large amounts
of unwanted inventories, which in turn, could have a depressing effect
on grower prices.
Retail demand is assumed to be inelastic, which indicates changes
in
[[Page 28687]]
price do not result in significant changes in the quantity demanded.
Consumer prices largely do not reflect fluctuations in cherry supplies.
Therefore, this proposal should have little or no effect on consumer
prices and should not result in a reduction in retail sales.
The free and restricted percentages established by this proposal
would provide the market with optimum supply and would apply uniformly
to all regulated handlers in the industry, regardless of size. As the
restriction represents a percentage of a handler's volume, the costs,
when applicable, are proportionate and should not place an extra burden
on small entities as compared to large entities.
The stabilizing effects of this proposal would benefit all handlers
by helping them maintain and expand markets, despite seasonal supply
fluctuations. Likewise, price stability positively impacts all growers
and handlers by allowing them to better anticipate the revenues their
tart cherries would generate. Growers and handlers, regardless of size,
would benefit from the stabilizing effects of the volume restriction.
As noted earlier, the Board discussed several carry-out inventory
alternatives, ranging from 70 million pounds to 100 million pounds. The
Board noted if the carry-out number was too large, it could have a
negative impact on grower returns, and if it was too small, it could
negatively impact the supply processors need before the harvest next
season. After consideration of the alternatives, the Board recommended
a carry-out of 85 million pounds.
The Board also weighed alternatives when discussing the economic
adjustment. At its June meeting, the Board did not recommend making an
economic adjustment after considering alternatives that included making
no economic adjustment or an economic adjustment of 26 million pounds.
However, in September, the Board revisited the issue and after
discussion, and considering the impact of purchases by the USDA on
available supply, recommended an economic adjustment of 30 million
pounds. Additionally, the Board met again on December 14, 2023, and
unanimously recommended adding another 3.24 million pounds to the
economic adjustment to reflect the additional production volume.
Given the concerns with regulation expressed by Board members and
industry members in attendance, the Board also considered recommending
no volume regulation. However, after considering the larger than
expected harvest and the carry-in inventory adding to the available
supply, the industry recommended a six percent restriction to the 2023-
24 crop. Thus, the alternatives were rejected.
The Board's meetings were widely publicized throughout the tart
cherry industry and all interested persons were invited to attend the
meeting and participate in Board deliberations on all issues. Like all
Board meetings, the June, September, and December meetings were public
meetings 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 impacts of
this action on small businesses.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
chapter 35), the Order's information collection requirements have been
previously approved by OMB and assigned OMB No. 0581-0177, Tart
Cherries Grown in the States of Michigan, New York, Pennsylvania,
Oregon, Utah, Washington, and Wisconsin. No changes are necessary in
those requirements as a result of this action. Should any changes
become necessary, they would be submitted to OMB for approval.
This proposed rule would not impose any additional reporting or
recordkeeping requirements on either small or large tart cherry
handlers. As with all Federal marketing order programs, reports and
forms are periodically reviewed to reduce information requirements and
duplication by industry and public sector agencies.
AMS is committed to complying with the E-Government Act, to promote
the use of the internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
AMS has not identified any relevant Federal rules that duplicate,
overlap or conflict with this proposed rule.
A small business guide on complying with fruit, vegetable, and
specialty crop marketing agreements and orders may be viewed at:
<a href="https://www.ams.usda.gov/rules-regulations/moa/small-businesses">https://www.ams.usda.gov/rules-regulations/moa/small-businesses</a>. Any
questions about the compliance guide should be sent to Richard Lower at
the previously mentioned address in the FOR FURTHER INFORMATION CONTACT
section.
After consideration of all relevant material presented, including
the information and recommendations submitted by the Board and other
available information, USDA has determined that this proposed rule is
consistent with and would effectuate the purposes of the Act.
A 30-day comment period is provided to allow interested persons to
comment on this proposed rule. All written comments timely received
will be considered before a final determination is made on this matter.
List of Subjects in 7 CFR Part 930
Cherries, Marketing agreements, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, the Agriculture
Marketing Services proposes to amend 7 CFR part 930 as follows:
PART 930--TART CHERRIES GROWN IN THE STATES OF MICHIGAN, NEW YORK,
PENNSYLVANIA, OREGON, UTAH, WASHINGTON, AND WISCONSIN
0
1. The authority citation for 7 CFR part 930 continues to read as
follows:
Authority: 7 U.S.C. 601-674.
0
2. Revise Sec. 930.256 and its heading title to read as follows:
Sec. 930.256 Free and restricted percentages for the 2023-24 crop
year.
The percentages for tart cherries handled by handlers during the
crop year beginning on July 1, 2023, which shall be free and
restricted, respectively, are designated as follows: Free percentage,
94 percent and restricted percentage, 6 percent.
Erin Morris,
Associate Administrator, Agricultural Marketing Service.
[FR Doc. 2024-08149 Filed 4-18-24; 8:45 am]
BILLING CODE P
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</html>Indexed from Federal Register on April 19, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.