81 FR 38885 - Marketing Order Regulating the Handling of Spearmint Oil Produced in the Far West; Salable Quantities and Allotment Percentages for the 2016-2017 Marketing Year

DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service

Federal Register Volume 81, Issue 115 (June 15, 2016)

This rule implements a recommendation from the Far West Spearmint Oil Administrative Committee (Committee) to 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 2016-2017 marketing year, which begins on June 1, 2016. The Far West production area includes the states of Washington, Idaho, and Oregon, and designated parts of Nevada and Utah. This rule establishes salable quantities and allotment percentages for Class 1 (Scotch) spearmint oil of 958,711 pounds and 45 percent, respectively, and for Class 3 (Native) spearmint oil of 1,209,546 pounds and 50 percent, respectively. The Committee locally administers the marketing order for spearmint oil produced in the Far West and recommended these salable quantities and allotment percentages to help maintain stability in the spearmint oil market.

[Federal Register Volume 81, Number 115 (Wednesday, June 15, 2016)]
[Rules and Regulations]
[Pages 38885-38892]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-14163]


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DEPARTMENT OF AGRICULTURE

Agricultural Marketing Service

7 CFR Part 985

[Doc. No. AMS-FV-15-0074; FV16-985-1 FR]


Marketing Order Regulating the Handling of Spearmint Oil Produced 
in the Far West; Salable Quantities and Allotment Percentages for the 
2016-2017 Marketing Year

AGENCY: Agricultural Marketing Service, USDA.

ACTION: Final rule.

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SUMMARY: This rule implements a recommendation from the Far West 
Spearmint Oil Administrative Committee (Committee) to 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 2016-2017 marketing year, which begins on June 1, 2016. The Far 
West production area includes the states of Washington, Idaho, and 
Oregon, and designated parts of Nevada and Utah. This rule establishes 
salable quantities and allotment percentages for Class 1 (Scotch) 
spearmint oil of 958,711 pounds and 45 percent, respectively, and for 
Class 3 (Native) spearmint oil of 1,209,546 pounds and 50 percent, 
respectively. The Committee locally administers the marketing order for 
spearmint oil produced in the Far West and recommended these salable 
quantities and allotment percentages to help maintain stability in the 
spearmint oil market.

DATES: June 16, 2016.

FOR FURTHER INFORMATION CONTACT: Dale Novotny, Marketing Specialist, or 
Gary Olson, Regional Director, Northwest Marketing Field Office, 
Marketing Order and Agreement Division, Specialty Crops Program, AMS, 
USDA; Telephone: (503) 326-2724, Fax: (503) 326-7440, or Email: 
[email protected] or [email protected].
    Small businesses may request information on complying with this 
regulation by contacting Antoinette Carter, Marketing Order and 
Agreement Division, Specialty Crops Program, AMS, USDA, 1400 
Independence Avenue SW., STOP 0237, Washington, DC 20250-0237; 
Telephone: (202) 720-2491, Fax: (202) 720-8938, or Email: 
[email protected].

SUPPLEMENTARY INFORMATION: This final 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 final rule in 
conformance with Executive Orders 12866, 13563, and 13175.
    This final rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. This final rule is not intended to have 
retroactive effect. Under the order now in effect, salable quantities 
and allotment percentages may be established for classes of spearmint 
oil produced in the Far West. This final rule will establish the

[[Page 38886]]

quantity of spearmint oil produced in the Far West, by class, which 
handlers may purchase from, or handle on behalf of, producers during 
the 2016-2017 marketing year, which begins on June 1, 2016.
    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 for the upcoming 
year is considered as well.
    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 to USDA the 
establishment of a salable quantity and allotment percentage for such 
class or classes of oil in the forthcoming marketing year. 
Recommendations for volume control are intended to ensure that market 
requirements for Far West spearmint oil are satisfied and orderly 
marketing conditions are maintained.
    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. The allotment percentage is the 
percentage used to calculate each producer's prorated share of the 
salable quantity. It is derived by dividing the salable quantity for 
each class of spearmint oil by the total of all producers' allotment 
bases for the same class of oil. Each producer's annual allotment of 
salable spearmint oil is calculated by multiplying their respective 
total allotment base by the allotment percentage for each class of 
spearmint oil. A producer's allotment base is their quantified share of 
the spearmint oil market based on a statistical representation of past 
spearmint oil production, with accommodation for reasonable, normal 
adjustments to such base as prescribed by the Committee and approved by 
USDA.
    Salable quantities and allotment percentages are established at 
levels intended to fulfill market requirements and to maintain orderly 
marketing conditions. Committee recommendations for volume control 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 21, 2015, and 
recommended salable quantities and allotment percentages for both 
classes of oil for the 2016-2017 marketing year. By a vote of 6-1, the 
Committee recommended the establishment of a salable quantity and 
allotment percentage for Scotch spearmint oil of 958,711 pounds and 45 
percent, respectively. With a unanimous vote, the Committee recommended 
the establishment of a salable quantity and allotment percentage for 
Native spearmint oil of 1,209,546 pounds and 50 percent, respectively. 
One Committee member did not vote in either motion.
    This final rule establishes the amount of Scotch and Native 
spearmint oil that handlers may purchase from, or handle on behalf of, 
producers during the 2016-2017 marketing year, which begins on June 1, 
2016. Salable quantities and allotment percentages have been placed 
into effect each season since the order's inception in 1980.

Class 1 (Scotch) Spearmint Oil

    As noted above, the Committee recommended a salable quantity of 
Scotch spearmint oil of 958,711 pounds and an allotment percentage of 
45 percent for the upcoming 2016-2017 marketing year. Motions for 
allotments of 41, 43, 46, 47, and 48 percent were made by members 
during the meeting but were ultimately not carried due to insufficient 
votes or a lack of seconding by other Committee members. To arrive at 
these recommendations, the Committee utilized 2016-2017 sales estimates 
for Scotch spearmint oil, as provided by several of the industry's 
handlers, historical and current Scotch spearmint oil production, 
inventory statistics, and international market data obtained from 
consultants for the spearmint oil industry.
    Trade demand for Far West Scotch spearmint oil is expected to 
decrease from the 1,000,000 pounds anticipated in the 2015-2016 
marketing year to 900,000 pounds in 2016-2017. Industry reports 
indicate that the decreased trade demand estimate is the result of 
decreased consumer demand for spearmint flavored products, especially 
chewing gum in China and India, as fruit flavors are gaining consumer 
preference. Strong, recovering production of spearmint oil in competing 
markets, most notably Canada, has also factored into the Committee's 
assessment of the market.
    Production of Far West Scotch spearmint oil increased from 
1,093,740 pounds in 2014 to an estimated 1,229,258 pounds for 2015. 
This increase in production, along with a simultaneous decrease in the 
demand estimate for the forthcoming 2016-2017 marketing year, is 
consistent with the Committee's desire to bolster the Scotch spearmint 
oil salable reserve inventory to ensure that the market is fully 
supplied. With the reserve pool of Scotch spearmint oil nearly 
exhausted, salable carry-in would be the only cushion to any 
unanticipated supply shocks that may affect the industry.
    The Committee estimates that there will be 233,752 pounds of 
salable carry-in of Scotch spearmint oil on June 1, 2016. This figure, 
which is the primary measure of excess supply, would be up dramatically 
from the 4,494 pounds carried-in the previous year on June 1, 2015. The 
Committee further estimates that salable carry-in will grow to 292,463 
pounds at the beginning of the 2017-2018 marketing year, if current 
market conditions and projections are maintained. This anticipated 
level of carry-in would be above the quantity that the Committee 
considers favorable (generally 150,000 pounds). However, without any 
Scotch spearmint oil in the reserve pool, the Committee believes that 
this higher salable carry-in is manageable.
    The 2016-2017 Scotch spearmint oil salable quantity of 958,711 
pounds recommended by the Committee represents a decrease of 306,914 
pounds from the salable quantity established the previous marketing 
year (1,265,625 pounds). Of the total salable quantity established for 
the 2015-2016 marketing year, the Committee believes that 36,367 pounds 
of annual allotment will go unfilled as a result of producers who did 
not produce their entire annual allotment and who do not have any 
Scotch spearmint oil in the reserve pool to fill the deficiency. 
Therefore, the

[[Page 38887]]

Committee estimates the total available supply for the 2015-2016 
marketing year to be just 1,233,752 pounds (4,494 pounds of carry-in 
plus 1,265,625 pounds of salable quantity less the 36,367 pounds of 
anticipated unused annual allotment).
    The Committee estimates the 2016-2017 marketing year trade demand 
for Scotch spearmint oil at 1,000,000 pounds. When considered in 
conjunction with the 2015-2016 marketing year total available supply, 
the Committee expects that there will be 233,752 pounds of available 
carry-in of Scotch spearmint oil on June 1, 2016. That carry-in, when 
combined with the recommended 2016-2017 marketing year salable quantity 
of 958,711 pounds, will result in a total supply of 1,192,463 pounds of 
Scotch spearmint oil for the 2016-2017 marketing year. This quantity is 
expected to fully satisfy estimated market demand of 900,000 pounds.
    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 maintain orderly marketing 
conditions. The recommended salable quantity of Scotch spearmint oil 
for the upcoming marketing year is less than the 1,265,853 pound 
salable quantity established for the previous year. Even so, the 
Committee expects that the market will be fully supplied for the 2016-
2017 marketing year. In addition, the Committee expects that Scotch 
spearmint oil inventories will be replenished after being completely 
exhausted during the 2013-2014 marketing year.
    The Committee believes that the recommended salable quantity will 
adequately meet demand, as well as result in a larger carry-in for the 
following year. The Committee developed its recommendation for Scotch 
spearmint oil salable quantity and allotment percentage for the 2016-
2017 marketing year based on the information discussed above, as well 
as the computational data outlined below.
    (A) Estimated carry-in of Scotch spearmint oil on June 1, 2016: 
233,752 pounds. This figure is the difference between the revised 2015-
2016 marketing year total available supply of 1,233,752 pounds and the 
estimated 2015-2016 marketing year trade demand of 1,000,000 pounds.
    (B) Estimated trade demand of Scotch spearmint oil for the 2016-
2017 marketing year: 900,000 pounds. This estimate was established by 
the Committee and is based on input from producers at six Scotch 
spearmint oil production area meetings held in mid-October 2015, as 
well as estimates provided by handlers and other meeting participants 
at the main meeting held October 21, 2015. The average estimated trade 
demand derived from the six production area producer meetings was 
1,027,666 pounds, which is 6,084 pounds less than the average of trade 
demand estimates submitted by handlers. Far West Scotch spearmint oil 
sales have averaged 1,023,729 pounds per year over the last three 
years, and 954,578 pounds over the last five years. Given the 
anticipated market conditions for the coming year, the Committee 
decided it was prudent to anticipate the lower trade demand at 900,000 
pounds. Should the initially established volume control levels prove 
insufficient to adequately supply the market, the Committee has the 
authority to recommend intra-seasonal increases, as were undertaken in 
the 2014-2015 marketing year, and several other previous marketing 
years.
    (C) Salable quantity of Scotch spearmint oil required from the 
2016-2017 marketing year production: 666,248 pounds. This figure is the 
difference between the estimated 2016-2017 marketing year trade demand 
(900,000 pounds) and the estimated carry-in on June 1, 2016 (233,752 
pounds). This salable quantity represents the minimum amount of Scotch 
spearmint oil that may be needed to satisfy estimated demand for the 
coming year.
    (D) Total estimated allotment base of Scotch spearmint oil for the 
2016-2017 marketing year: 2,130,469 pounds. This figure represents a 
one-percent increase over the revised 2015-2016 total allotment base of 
2,109,375 pounds as prescribed by the order under Sec.  985.53(d)(1). 
The one-percent increase equals 21,094 pounds of Scotch spearmint oil. 
This total estimated allotment base 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 adjustment is usually 
minimal.
    (E) Computed Scotch spearmint oil allotment percentage for the 
2016-2017 marketing year: 31.3 percent. This percentage is computed by 
dividing the minimum required salable quantity (666,248 pounds) by the 
total estimated allotment base (2,130,469 pounds).
    (F) Recommended Scotch spearmint oil allotment percentage for the 
2016-2017 marketing year: 45 percent. This is the Committee's 
recommendation and is based on the computed allotment percentage (31.3 
percent), and input from producers and handlers at the October 21, 2015 
meeting. The recommended 45 percent allotment percentage reflects the 
Committee's belief that the computed percentage (31.3 percent) may not 
adequately supply the potential 2016-2017 Scotch spearmint oil market 
demand.
    (G) Recommended Scotch spearmint oil salable quantity for the 2016-
2017 marketing year: 958,711 pounds. This figure is the product of the 
recommended salable allotment percentage (45 percent) and the total 
estimated allotment base (2,130,469 pounds) for the 2016-2017 marketing 
year.
    (H) Estimated total available supply of Scotch spearmint oil for 
the 2016-2017 marketing year: 1,192,463 pounds. This figure is the sum 
of the 2016-2017 recommended salable quantity (958,711 pounds) and the 
estimated carry-in on June 1, 2016 (233,752 pounds).

Class 3 (Native) Spearmint Oil

    The Committee also recommended a 2016-2017 Native spearmint oil 
salable quantity of 1,209,546 pounds and an allotment percentage of 50 
percent at the October 21, 2015, meeting. These figures represent a 
decrease of 131,723 pounds and 5 percent, respectively, from the 
previous marketing year. To formulate this recommendation, the 
Committee utilized Native spearmint oil sales estimates for the 2016-
2017 marketing year, as provided by several of the industry's handlers, 
as well as historical and current Native spearmint oil market 
statistics.
    The Committee estimates that there will be 609,603 pounds of Native 
spearmint oil in the reserve pool on June 1, 2016. This figure, which 
is the excess Native spearmint oil production held in reserve by 
producers, is up from the previous industry peak of 606,942 pounds on 
June 1, 2011. The 2016-2017 estimate is 163,765 pounds higher than the 
previous year's reserve pool level. Reserve pool levels of Native 
spearmint oil had been slowly moving toward the level that the 
Committee believes is optimal for the industry prior to the spike that 
is expected for the 2015-2016 marketing year. The increase in Native 
spearmint oil held in reserve is the direct result of greatly increased 
production and only moderately increased industry trade demand.
    Far West Native spearmint oil production was 1,274,926 pounds in 
2014, but jumped to 1,510,936 pounds in 2015, an 18.5 percent increase 
in just one year. In contrast, sales of Native spearmint oil have only 
been growing at around a 3 percent rate over the past five years. The 
Committee hopes that Native spearmint oil reserve pool inventory will 
reverse its current trend

[[Page 38888]]

over the course of the 2016-2017 marketing year and begin to decrease 
to levels that are deemed optimal for the industry as producers curtail 
excess production and utilize their reserve pool stock to fill some of 
their annual allotments.
    As mentioned previously, Committee statistics indicate that demand 
for Far West Native spearmint oil has been slightly increasing in 
recent years, peaking at 1,390,984 pounds for the full 2014-2015 
marketing year; the most recent full marketing year recorded. In 
addition, recorded sales for June through October of 2015 are running 
ahead of the same period last year. This trend is expected to continue 
even as imports of spearmint oil are also rising. Canada has more than 
doubled shipments of spearmint oil into the U.S. market from 2014 to 
2015, and Chinese shipments are up 14 percent over the same period.
    The one exception in imports, India, has reduced shipments during 
the last year. Recent reports used by the Committee indicate that 
spearmint oil produced in India is improving in quality, yet decreasing 
in acreage. Indian spearmint oil is increasingly regarded as an 
alternative to high quality, Far West Native spearmint oil, but 
production problems have limited importation into the U.S. market. As a 
result, imports from India, while still in demand, decreased in the 
past year. However, spearmint oil from India may return as a major 
threat to the Far West Native spearmint oil industry's domestic market 
share in the future.
    During a recent tour of U.S. end-user companies, the chairperson 
and Committee staff received input that indicated sales of mint 
products both domestically and abroad have slowed down. This is largely 
the result of slowing economies in Europe and Asia. End-users also felt 
the inventories of Native spearmint oil that they currently have on 
hand are adequate for the time being. The end-users did indicate that 
they intend to continue to rely on Far West production as their main 
source of high quality Native spearmint oil, but such demand may be at 
lower quantities moving forward in response to current market factors.
    As such, spearmint oil handlers, who regularly help predict trade 
demand for Far West Native spearmint oil, estimate demand to range 
between 1,000,000 and 1,400,000 pounds (with a weighted average of 
1,350,000 pounds) for the upcoming 2016-2017 marketing year. The 
Committee used the handlers' input when it established the estimated 
2016-2017 marketing year Native spearmint oil trade demand of 1,275,000 
pounds. The estimated carry-in of 142,657 pounds of Native spearmint 
oil on June 1, 2016, in conjunction with the Committee-recommended 
salable quantity of 1,209,546 pounds, will result in an estimated total 
available supply of 1,352,203 pounds of Native spearmint oil during the 
2016-2017 marketing year. The Committee expects that 77,203 pounds of 
salable Native spearmint oil will be carried into the 2017-2018 
marketing year, a reduction of 65,454 pounds.
    Carry-in spearmint oil is distinct from reserve pool spearmint oil 
and represents the amount of salable spearmint oil produced, but not 
marketed, in a previous year or years, but is available for sale in the 
current year under a previous year's annual allotment. It is the 
primary measure of excess spearmint oil supply under the order as it 
represents overproduction in prior years that is currently available to 
the market without restriction. Reserve pool oil, on the other hand, 
represents the amount of excess spearmint oil production held off the 
market under marketing order provisions and can only be marketed under 
certain conditions.
    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 while maintaining orderly 
marketing conditions. With that in mind, the Committee developed its 
recommendation for Native spearmint oil salable quantity and allotment 
percentage for the 2016-2017 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, 2016: 
142,657 pounds. This figure is the difference between the revised 2015-
2016 marketing year total available supply of 1,465,990 pounds and the 
estimated 2015-2016 marketing year trade demand of 1,323,333 pounds.
    (B) Estimated trade demand of Native spearmint oil for the 2016-
2017 marketing year: 1,275,000 pounds. This estimate was established by 
the Committee and is based on input from producers at six Native 
spearmint oil production area meetings held in mid-October 2015, as 
well as estimates provided by handlers and other meeting participants 
at the October 21, 2015, meeting. This figure represents a decrease of 
31,500 pounds from the previous year's estimate. The average estimated 
trade demand for Native spearmint oil from the six production area 
meetings was 1,323,333 pounds, whereas the handlers' estimates ranged 
from 1,000,000 to 1,400,000 pounds. The average of Far West Native 
spearmint oil sales over the last three years is 1,340,045 pounds. The 
Committee chose to be conservative in the establishment of its trade 
demand estimate to avoid oversupplying the market in the face of 
increasing production.
    (C) Salable quantity of Native spearmint oil needed from the 2016-
2017 marketing year production: 1,132,343 pounds. This figure is the 
difference between the estimated 2016-2017 marketing year estimated 
trade demand (1,275,000 pounds) and the estimated carry-in on June 1, 
2016 (142,657 pounds). This is the minimum amount of Native spearmint 
oil that the Committee believes will be required to meet the 
anticipated 2016-2017 marketing year trade demand.
    (D) Total estimated allotment base of Native spearmint oil for the 
2016-2017 marketing year: 2,419,091 pounds. This figure represents a 
one-percent increase over the revised 2015-2016 total allotment base of 
2,395,140 pounds as prescribed by the order in Sec.  985.53(d)(1). The 
one-percent increase equals 23,951 pounds of Native spearmint oil. This 
estimate 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 Native spearmint oil allotment percentage for the 
2016-2017 marketing year: 46.8 percent. This percentage is calculated 
by dividing the required salable quantity (1,132,343 pounds) by the 
total estimated allotment base (2,419,091 pounds) for the 2016-2017 
marketing year.
    (F) Recommended Native spearmint oil allotment percentage for the 
2016-2017 marketing year: 50 percent. This is the Committee's 
recommendation based on the computed allotment percentage (46.8 
percent), the average of the computed allotment percentage figures from 
the six production area meetings (47.3 percent), and input from 
producers and handlers at the October 21, 2015, main meeting. The 
recommended 50 percent allotment percentage is also based on the 
Committee's belief that the computed percentage (46.8 percent) may not 
adequately supply the potential market for Native spearmint oil in the 
2016-2017 marketing year.
    (G) Recommended Native spearmint oil 2016-2017 marketing year 
salable quantity: 1,209,546 pounds. This figure is the product of the 
recommended allotment percentage (50 percent) and the total estimated 
allotment base (2,419,091 pounds).

[[Page 38889]]

    (H) Estimated available supply of Native spearmint oil for the 
2016-2017 marketing year: 1,352,203 pounds. This figure is the sum of 
the 2016-2017 recommended salable quantity (1,209,546 pounds) and the 
estimated carry-in on June 1, 2016 (142,657 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 958,711 pounds and 45 percent, 
and 1,209,546 pounds and 50 percent, respectively, are based on the 
goal of maintaining market stability. The Committee anticipates that 
this goal will be achieved by matching the available supply of each 
class of spearmint oil to the estimated demand of each, thus avoiding 
extreme fluctuations in inventories and prices.
    The salable quantities presented in this rule 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 order contains a provision in Sec.  985.51 for 
intra-seasonal increases to allow the Committee the flexibility to 
respond quickly to changing market conditions.
    Under volume regulation, producers who produce more than their 
annual allotments during the marketing year may transfer such excess 
spearmint oil to producers who have produced less than their annual 
allotment. In addition, on December 1 of each year, producers that have 
not transferred their excess spearmint oil to other producers must 
place their excess spearmint oil production into the reserve pool to be 
released in the future in accordance with market needs and under the 
Committee's direction.
    This regulation is similar to regulations issued in prior seasons. 
The average initial allotment percentage for the five most recent 
marketing years for Scotch spearmint oil is 50.4 percent, while the 
average initial allotment percentage in the same five-year period for 
Native spearmint oil is 51.4 percent.
    Costs to producers and handlers resulting from this rule are 
expected to be offset by the benefits derived from a more stable market 
and increased returns. In conjunction with the issuance of this final 
rule, USDA has reviewed the Committee's marketing policy statement for 
the 2016-2017 marketing year. The Committee's marketing policy 
statement, a requirement whenever the Committee recommends volume 
regulation, fully meets the intent of Sec. Sec.  985.50 and 985.51 of 
the order.
    During its discussion of potential 2016-2017 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'' (http://www.ams.usda.gov/publications/content/1982-guidelines-fruit-vegetable-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 rule also 
provides producers with information on the amount of spearmint oil that 
should be produced for the 2016-2017 season in order to meet 
anticipated market demand.

Final 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 final regulatory flexibility 
analysis.
    The purpose of the RFA is to fit regulatory actions to the scale of 
businesses subject to such actions in order that small businesses will 
not be unduly or disproportionately burdened. Marketing orders issued 
pursuant to the Act, and the rules issued thereunder, are unique in 
that they are brought about through group action of essentially small 
entities acting on their own behalf.
    There are eight spearmint oil handlers subject to regulation under 
the order, approximately 38 producers of Scotch spearmint oil, and 
approximately 92 producers of Native spearmint oil in the regulated 
production area. Small agricultural service firms are defined by the 
Small Business Administration (SBA) as those having annual receipts of 
less than $7,500,000, and small agricultural producers are defined as 
those having annual receipts of less than $750,000 (13 CFR 121.201).
    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 12 of the 38 Scotch spearmint oil producers, and 28 of 
the 92 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 production of spearmint oil and are not financially able 
to hold spearmint oil for sale in future years. In addition, small 
producers generally do not have a large assortment of other crops to 
cushion seasons with poor spearmint oil returns.
    Conversely, large, diversified producers have the potential to 
endure

[[Page 38890]]

one or more seasons of poor spearmint oil markets because income from 
alternate crops could support their operation for a period of time. 
Reasonable assurance of a stable price and market provides all 
producing entities with the ability to maintain proper cash flow and to 
meet annual expenses. The benefits for this rule are expected to be 
equally available to all producers and handlers regardless of their 
size.
    This final rule establishes 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 2016-2017 marketing year. The 
Committee recommended this rule to help maintain stability in the 
spearmint oil market by matching supply to estimated demand, thereby 
avoiding extreme fluctuations in supplies and prices. Establishing 
quantities that may be purchased or handled during the marketing year 
through volume regulations allows producers to coordinate their 
spearmint oil production with the expected market demand. Authority for 
this action is provided in Sec. Sec.  985.50, 985.51, and 985.52 of the 
order.
    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. 
Historically, demand for spearmint oil tends to change slowly from year 
to year.
    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 little impact on the retail 
prices for those goods.
    In 2013, 2014, and 2015, the Committee set salable percentages at 
levels that resulted in most, if not all, of the spearmint oil 
production being made available to the market. This was in response to 
the increased demand for spearmint oil from the Far West due to 
increased utilization by end-users and the reduced supply of spearmint 
oil coming from other production areas, both domestic and foreign.
    Although there is still strong demand for spearmint oil, competing 
areas (mainly Canada) have experienced better than expected production 
in 2015 and will create some marketing pressure for spearmint oil from 
the Far West. In addition, the slowing of international markets for 
spearmint flavored products has negatively impacted the demand for 
domestically produced spearmint oil. Thus, the lower salable quantities 
and allotment percentages recommended by the Committee for the 2016-
2017 marketing year are intended to be responsive to the changing 
environment of the spearmint oil market.
    In the late 1990's, the Committee recommended higher than normal 
salable percentages in hopes of gaining market share. This approach did 
not work, and in the following years the salable percentage was reduced 
in order to work through the excess spearmint oil production and 
resulting build-up of inventory. In order to avoid a similar scenario 
moving forward, the Committee, relying heavily on the information 
provided to it by spearmint oil handlers during the October 21, 2015, 
meeting, ultimately recommended reducing the 2016-2017 marketing year 
salable percentages from the previous year to better align the 
available supply with market demand. The Committee reported that recent 
producer prices for spearmint oil are $18.00 to $20.00 per pound.
    Spearmint oil production tends to be cyclical. Prior to the 
inception of the marketing order in 1980, extreme variability in 
producer prices was common. For example, the season average producer 
price for Washington Native spearmint oil in 1971 was $3.00 per pound. 
By 1975, the producer price had risen to $11.00 per pound, an increase 
of over 260 percent in just four years. Such fluctuations were not 
unusual in the spearmint oil industry in the years leading up to the 
promulgation of the order. For most producers, this was an untenable 
situation. Years of relatively high spearmint oil production, with 
demand remaining relatively stable, led to periods in which large 
producer stocks of unsold spearmint oil depressed producer prices. 
Shortages and high prices followed in subsequent years, as producers 
responded to price signals by cutting back production.
    After establishment of the order, the supply and price variability 
in the spearmint oil market moderated. During the 20-year period from 
1987 to 2006, the season average producer price for Native spearmint 
oil ranged from a high of $11.10 to a low $9.10 per pound, or a 
difference of 22 percent. No change in producer price from one year to 
the next during this period was more than $1.00 per pound. This is a 
remarkable record of price stability. From 2006 to 2008, prices jumped 
by $3.80 per pound as contracts tied to input costs were prevalent in 
the industry. During this time period, prices for fuel, fertilizer, and 
labor increased dramatically, resulting in higher contracted producer 
prices, and a resulting concurrent increase in the overall season 
average producer price for the industry.
    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 producer 
prices for the period 1980-2014 (since the marketing order has been in 
effect) is 0.23, compared to 0.36 for the decade prior to the 
promulgation of the order (1970-79) and 0.49 for the prior 20-year 
period (1960-79). The coefficient of variation, as presented herein, 
was calculated by USDA from information provided by the Committee and 
the National Agricultural Statistics Service. This analysis provides an 
indication of the price stabilizing impact of the marketing order as 
higher CV values correspond to greater variability.
    According to information compiled by the Committee, production in 
the shortest marketing year since the establishment of the order was 
about 47 percent of the 34-year average (1.92 million pounds from 1980 
through 2014) and the largest crop was approximately 160 percent of the 
34-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 the 
cyclical nature of the spearmint oil industry, 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 
increases to production costs. While prices for spearmint oil have been 
relatively steady, the cost of production has increased to the extent 
that plans to plant spearmint may be postponed or vacated indefinitely. 
Producers may also be 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

[[Page 38891]]

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. This 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 market.
    By December 1 of each year, the Committee identifies any oil that 
individual producers have produced above the volume specified on their 
annual allotment certificates. Prior to December 1, such excess oil can 
be transferred to another producer to fill a deficiency in that 
producer's annual allotment as provided for in Sec.  985.156(a).
    The order allows limited quantities of excess oil to be sold by one 
producer to another producer to fill production deficiencies during a 
marketing year. A deficiency occurs when on-farm production is less 
than a producer's annual allotment. When a producer has a deficiency, 
the producer's own reserve oil can be utilized to fill that deficiency, 
or excess production (production of spearmint oil in excess of the 
producer's annual allotment) from another producer may also be secured 
to fill the deficiency. As mentioned previously, all of these 
provisions need to be exercised prior to December 1 of each year.
    Excess spearmint oil not transferred to another producer to fill a 
deficiency is held in storage and, on December 1, is added to the 
reserve pool administered by the Committee pursuant to Sec.  985.157. 
The Committee maintains the reserve pool for each class of spearmint 
oil. Once spearmint oil is placed in the reserve pool, such spearmint 
oil cannot enter the market during that marketing year unless USDA 
approves a Committee recommendation to increase the salable quantity 
and allotment percentage for a certain class of oil, subsequently 
making a portion of the reserve pool of that class of spearmint oil 
available to the market. Without an increase in the salable quantity 
and allotment percentage, spearmint oil placed in the reserve pool 
cannot be removed from the reserve pool and marketed in the marketing 
year in which it is initially placed in the reserve pool. However, 
producers may dispose of reserve spearmint oil from their own 
production, and held in their own account, under certain provisions in 
subsequent marketing years under the supervision of the Committee.
    While the Committee administers the reserve pool of spearmint oil, 
ownership and physical possession of spearmint oil held in reserve does 
not transfer to the Committee. The Committee accounts for, and controls 
the release of, reserve spearmint oil, but does not take title to, or 
dispose of, any such oil of its own accord. Producers, at their sole 
discretion, make the decisions regarding the disposition of oil held in 
the reserve pool under any one of three possible mechanisms. First, 
producers may utilize reserve oil from their own production to fill 
intra-seasonal increases in the allotment percentage and salable 
quantity. Second, producers may fill an ensuing year's annual allotment 
from spearmint oil held in the reserve pool. Lastly, producers may 
exchange salable oil of the same class and quantity of reserve oil from 
their own production to rotate stock, so long as the Committee is 
properly notified and the oil is properly identified.
    In any given year, the total available supply of spearmint oil is 
composed of current production plus salable 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 salable spearmint oil to carry over into the 
subsequent marketing year. If the industry has production in excess of 
the salable quantity, the reserve pool absorbs the surplus quantity of 
spearmint oil, thereby withholding it from the market, unless such oil 
is needed to fill unanticipated intra-seasonal increases in demand. In 
this way, excess spearmint oil is not allowed to oversupply the market 
and create price instability. Likewise, if production is insufficient 
in any given year to fully supply the market with spearmint oil, the 
reserve pool oil can be released to satisfy the market demand until 
production can be increased.
    Therefore, 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. Reserve pool stocks, which increase in 
high production years, are drawn down in years where the crop is short.
    An econometric model generated by USDA 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 2016-2017 marketing 
year for both classes of oil at 2,175,000 pounds, and that the expected 
combined salable carry-in will be 376,409 pounds. This results in a 
combined required salable quantity of 1,798,591 pounds (2,175,000 
pounds of trade demand less 376,409 pounds of carry-in). Under volume 
control, total sales of spearmint oil by producers for the 2016-2017 
marketing year will be limited to 2,544,666 pounds (the recommended 
salable quantity for both classes of spearmint oil of 2,168,257 pounds 
plus 376,409 of carry-in). This total available supply of 2,544,666 
pounds should be more than adequate to supply the 2,175,000 pounds of 
anticipated trade demand for spearmint oil.
    The recommended allotment percentages, upon which 2016-2017 
producer allotments are based, are 45 percent for Scotch spearmint oil 
and 50 percent for Native spearmint oil. Without volume controls, 
producers would not be limited to these allotment levels, and could 
produce and sell an unrestricted quantity of spearmint oil. The USDA 
econometric model estimated that the season average producer price per 
pound (from both classes of spearmint oil) would decline about $1.45 
per pound as a result of the higher quantities of spearmint oil that 
would be produced and marketed without volume control. The surplus 
situation for the spearmint oil market that would exist without volume 
controls in 2016-2017 also would likely dampen prospects for improved 
producer prices in future years because of the buildup in stocks.
    The use of volume control allows the industry to fully supply 
spearmint oil markets while avoiding the negative consequences of over-
supplying these markets. The use of volume control is believed to have 
little or no effect on consumer prices of products containing spearmint 
oil and should not result in fewer retail sales of such products.
    The Committee discussed alternatives to the recommendations 
submitted for approval for both classes of spearmint oil. The Committee 
discussed and rejected the idea of not regulating any volume for both 
classes of spearmint oil because of the severe price-depressing effects 
that would likely occur without

[[Page 38892]]

volume control. The alternative to establish salable quantities and 
allotment percentages at the 2015-2016 marketing year's levels was 
discussed, but not put to any motion, for both classes of oil. The 
Committee also considered salable quantities and allotment percentages 
that were above and below the levels that were ultimately recommended 
for Scotch spearmint oil. Ultimately, the action taken by the Committee 
was to decrease the salable quantities and allotment percentages for 
both Class 1 and Class 3 spearmint oil from the 2015-2016 marketing 
year levels.
    As noted earlier, the Committee's recommendation to establish 
salable quantities and allotment percentages for both classes of 
spearmint oil was made after careful consideration of all available 
information including: (1) The estimated quantity of salable oil of 
each class held by producers and handlers; (2) the estimated demand for 
each class of oil; (3) the prospective production of each class of oil; 
(4) the total of allotment bases of each class of oil for the current 
marketing year and the estimated total of allotment bases of each class 
for the ensuing marketing year; (5) the quantity of reserve oil, by 
class, in storage; (6) producer prices of oil, including prices for 
each class of oil; and (7) general market conditions for each class of 
oil, including whether the estimated season average price to producers 
is likely to exceed parity.
    Based on its review, the Committee believes that the salable 
quantities and allotment percentages will achieve the objectives 
sought. The Committee also believes that if there is no volume 
regulation in effect for the upcoming marketing year, the Far West 
spearmint oil industry would return to the pronounced cyclical price 
patterns that occurred prior to the promulgation of the order. As 
previously stated, annual salable quantities and allotment percentages 
have been issued for both classes of spearmint oil since the order's 
inception. The salable quantities and allotment percentages established 
herein are expected to facilitate the goal of maintaining orderly 
marketing conditions for Far West spearmint oil for 2016-2017 and 
future marketing years.
    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, 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 rule establishes the salable quantities and allotment 
percentages for Class 1 (Scotch) spearmint oil and Class 3 (Native) 
spearmint oil produced in the Far West during the 2016-2017 marketing 
year. Accordingly, this action will 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.
    As noted in the initial regulatory flexibility analysis, USDA has 
not identified any relevant Federal rules that duplicate, overlap or 
conflict with this final 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.
    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 21, 2015, meeting was 
a public meeting and all entities, both large and small, were able to 
express views on the issues presented. A proposed rule concerning this 
action was published in the Federal Register on March 23, 2016 (81 FR 
15450). A copy of the rule was provided to Committee staff, who in turn 
made it available to all Far West spearmint oil producers, handlers, 
and interested persons. Finally, the rule was made available through 
the internet by USDA and the Office of the Federal Register. A 15-day 
comment period ending April 7, 2016, was provided to allow interested 
persons to respond to the proposal. No comments were received.
    A small business guide on complying with fruit, vegetable, and 
specialty crop marketing agreements and orders may be viewed at: http://www.ams.usda.gov/rules-regulations/moa/small-businesses. Any questions 
about the compliance guide should be sent to Antoinette Carter at the 
previously mentioned address in the FOR FURTHER INFORMATION CONTACT 
section.
    After consideration of all relevant matter presented, including the 
information and recommendation submitted by the Committee and other 
available information, it is hereby found that this rule, as 
hereinafter set forth, will tend to effectuate the declared policy of 
the Act.
    It is further found that good cause exists for not postponing the 
effective date of this rule until 30 days after publication in the 
Federal Register (5 U.S.C. 553) because the 2016-2017 marketing year 
starts on June 1, 2016, and handlers will need to begin purchasing the 
spearmint oil allotted under this rulemaking. Further, handlers are 
aware of this rule, which was recommended at a public meeting. Finally, 
a 15-day comment period was provided for in the proposed rule, and no 
comments were received.

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 
amended as follows:

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

0
1. The authority citation for 7 CFR part 985 continues to read as 
follows:

    Authority: 7 U.S.C. 601-674.


0
2. Section 985.235 is added to read as follows:


Sec.  985.235  Salable quantities and allotment percentages--2016-2017 
marketing year.

    The salable quantity and allotment percentage for each class of 
spearmint oil during the marketing year beginning on June 1, 2016, 
shall be as follows:
    (a) Class 1 (Scotch) oil--a salable quantity of 958,711 pounds and 
an allotment percentage of 45 percent.
    (b) Class 3 (Native) oil--a salable quantity of 1,209,546 pounds 
and an allotment percentage of 50 percent.

    Dated: June 10, 2016.
Elanor Starmer,
Administrator, Agricultural Marketing Service.
[FR Doc. 2016-14163 Filed 6-14-16; 8:45 am]
BILLING CODE P