SUPPLEMENTARY INFORMATION:

This action, pursuant to 5 U.S.C. 553, amends the regulatory provisions under the Clingstone Peach Diversion Program (7 CFR part 82). This rule is issued under the Agricultural Adjustment Act Amendment of 1935, as amended (Act) (7 U.S.C. 612c). This action has been determined to be non-significant and therefore was not reviewed by the Office of Management and Budget (OMB) under the review process required by Executive Order 12866. The annual effect of this rule on the economy will be below the $100 million threshold for mandatory review established in the Executive Order. Additionally, this action is exempt from the requirements of Executive Order 14192, “Unleashing Prosperity Through Deregulation,” as, pursuant to section (1), this interim rule amends an existing regulation and does not promulgate any new regulation. Further, the amended regulation will be voluntary, and the prospective regulated parties will be free to determine if, and to what extent, they wish to participate, thus aligning with the intent of the Executive Order.

This 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. The Agricultural Marketing Service (AMS) has determined this 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 rule has been reviewed under Executive Order 12988, “Civil Justice Reform.” This rule is not intended to have a retroactive effect.

Authority for a Diversion Program

Programs to reestablish the purchasing power of U.S. farmers are authorized by clause (3) of section 32 of the Act, hereinafter referred to as “Section 32.” (7 U.S.C. 612c). Section 32 authorizes USDA to reestablish farmers' purchasing power by making payments in connection with the normal production of any agricultural commodity for domestic consumption. Section 32 also authorizes USDA to use funds at such times, and in such manner, and in such amounts, as USDA finds will effectuate substantial accomplishments of any one or more of the purposes of the section. USDA's determinations as to what constitutes normal production for domestic consumption shall be final.

The diversion Program as reestablished herein is expected to incentivize clingstone peach growers to voluntarily reduce excess production capacity through the removal of clingstone peach trees. The Program is intended to reestablish the purchasing power of California clingstone peach growers who have suffered from systemic overproduction and low commodity prices. Those negative economic conditions are the result of declining demand for canned peaches over the past two decades and increasing competition in the domestic market from imported canned peaches. Economic conditions in the domestic clingstone peach industry were further challenged in 2025 by the closure of a canned fruit processing facility in California, leaving only one cooperatively owned peach canning company, operating two processing facilities, in the state.

Need for a Diversion Program

Domestic production of clingstone peaches is concentrated in California. Although there are more than 200 peach varieties, there are just two basic types: clingstone and freestone. Clingstone peaches—so named because their flesh “clings” to the stone, or pit—are almost exclusively canned due to their ability to retain flavor and textural consistency. Other relatively minor uses include frozen peaches, baby food, and fruit concentrate for juice. Freestone peaches—so named because their flesh is readily removed from the stone—are primarily produced for the fresh market, with secondary outlets including the frozen and dried fruit market.

Peaches are grown commercially in more than 20 states. The National Agricultural Statistics Service (NASS) reported that, in 2024, California produced about 75 percent of all types of peaches (clingstone and freestone) grown in the U.S. Other significant peach producing states, including South Carolina, Georgia, Pennsylvania, New Jersey, and Colorado, had a combined production of a little more than 24 percent of the U.S. total. NASS reports that U.S. production of processed clingstone peaches totaled approximately 312,650 tons in 2024. Of this total, 299,170 tons, or 96 percent, were produced in California.

Globally, China and Greece are the world's top producers of canned peaches and have been the largest exporters to the U.S. According to the Foreign Agricultural Service (FAS), the U.S. has imported an average of approximately 53,000 tons of canned peaches from Greece per year over the last three tears, followed closely by China with an average of 50,000 tons. Thailand, Chile, Spain, and South Africa are other top exporters to the U.S., each averaging between 2,500 tons to 5,500 tons of canned peaches per year since 2023.

Since the 1990s, domestic canned peach production has been declining, with NASS reporting that California clingstone peach production has fallen from 530,000 tons in 2004 to 228,250 tons in 2025. Once a net exporter of canned peaches, the U.S. has been a net importer for the past several decades as production has increasingly moved offshore. This increased reliance on imports is due to several factors, including high domestic labor and other input costs, subsidized over-production in competing countries, unfavorable exchange rates, and unfair, non-reciprocal trade practices. Labor costs, which account for more than two-thirds of a grower's direct production costs, as well as the costs of energy, chemicals, fertilizer, and equipment have climbed dramatically over the last few years. Producer prices have not kept pace with these increased costs.

The increased consumption of imported canned peaches has contributed to a significant consolidation of the domestic canned peach industry in California. Between 2005 and 2022, the number of growers declined from about 700 to approximately 450, according to the latest figures published by NASS. In addition, many of California's domestic fruit canning operations were permanently closed over that period. In the 1980s, there were 11 processors of canned peaches across the state. In 2000, the largest processor of clingstone peaches at the time, Tri-Valley Growers, declared bankruptcy and closed its eight canning facilities. The industry saw additional consolidation in the 2010s with the closure of Del Monte Foods' Kingsburg, CA plant in 2012 and Seneca Foods' Modesto, CA plant in 2018. Most recently, on July 1, 2025, Del Monte Foods declared bankruptcy and announced plans to close its sole remaining California cannery, leaving only a single processor entity, Pacific ( printed page 48241) Coast Producers (PCP), operating two processing facilities in the state.

As a result of these conditions, bearing acres of clingstone peaches in California have declined from an estimated 19,900 acres in 2014 to an estimated 13,300 acres in 2025. However, due in large part to 20-year peach contracts being offered by Del Monte Foods pre-bankruptcy, farmers planted more than 4,300 new acres of clingstone peach trees between 2023 and 2025. While some of this new acreage has been offset with concurrent acreage reductions elsewhere, the California Canning Peach Association (CCPA) estimates that, without extraordinary measures, bearing acres may increase to about 15,500 acres by 2028. The recent closure of the Del Monte Foods processing plant in Modesto, CA has greatly impaired the industry's ability to process all of the established clingstone peach production, leaving many growers without a market for their excess supply.

Once planted, clingstone peach trees take three years to produce fruit in commercial quantities. Once a peach grower has committed funds to the planting and maintenance of an orchard, it is difficult to reverse those decisions and recoup the costs. Because supply is slow to adjust to changing market conditions, without some remedial action the industry anticipates many years of canning peach production outpacing the demand for canned peaches, resulting in a continuation, if not a worsening, of disruptive market conditions.

As such, CCPA requested a diversion program on behalf of the clingstone peach growers to bring the supply and demand balance back to the industry. Established in 1922, CCPA is a nonprofit cooperative bargaining association, owned and directed by its member growers. CCPA negotiates an annual grower price and otherwise acts on behalf of its roughly 300 grower members, who collectively produce approximately 85 percent of the clingstone peaches grown in California.

Industry Self-Help Initiatives

The California clingstone peach industry has taken several steps to deal with its oversupply issues. The industry sponsored a diversion program in the spring of 2005, resulting in the removal of trees from approximately 2,000 acres. CCPA has also initiated and helped fund other efforts to aid the industry, including: research projects aimed at reducing the cost of production, export incentive programs to increase the volume of peach exports, and encouraging its growers to limit new plantings to better align supply with demand. However, despite the industry's efforts to mitigate its systemic supply and demand imbalance, production of clingstone peaches continues to be well in excess of normal market needs.

Following the bankruptcy of Del Monte Foods, the company formally rejected all CCPA peach contracts for 2026 and future years, leaving over 5,600 acres of peaches—many recently planted—without a processor contract and without any viable alternative market outlets. The Program, wholly consisting of a reduction in peach production capacity through the removal of peach trees, will provide relief to the peach growers who have been harmed by the contraction of the domestic peach canning industry and will assist the industry in achieving a more balanced supply-demand situation in both the short- and long-term.

Tree Diversion Program

On January 13, 2026, the California clingstone peach industry requested $9 million in Federal funds, inclusive of administrative costs, to reestablish the Clingstone Peach Diversion Program—a voluntary tree removal program initially implemented in 2005 (70 FR 67306, November 4, 2005). CCPA has pledged an additional $1.5 million of their funds to augment the Federal funds when the Program is effectuated.

Under the parameters of the Program, the industry expects that at least 3,000 bearing acres of clingstone peach trees will be removed, or approximately 22 percent of the 13,900 acres currently in production. To be eligible for the Program, growers must have had verifiable commercial production under a processor contract for deliveries during the 2025 crop year, with some exceptions for young trees. Non-bearing acres and orchards that have been abandoned, previously removed, or which the land is slated to be sold for commercial purposes—such as shopping centers or housing developments—will not be eligible for participation, except under certain conditions. Orchards which were contracted with a processor for crop year 2025, but which were removed on or after October 1, 2025, following the termination or rejection of such contracts due to the bankruptcy of the processor, may be eligible for reimbursement, provided that both production and tree removal can be verified and the applicant meets all other Program terms and conditions. However, growers who delivered their 2025 clingstone peach crop to a cooperative processor, and subsequently divested their cooperative processor membership rights, will not be eligible to participate in the Program or receive compensation for removal of their clingstone peach trees.

The Program will be jointly administered by AMS and CCPA under a cooperative agreement. Any California clingstone peach grower wishing to participate in the Program will be required to file an application with CCPA on a form, “Application for Clingstone Peach Diversion Program,” approved by OMB. The application period will begin on Monday, August 3, 2026, following publication of this rule announcing the terms and conditions of the Program. Applications will be accepted for 30 days on a rolling basis and will be approved in the order of receipt on a first-come, first-served basis, until either the 30-day period has elapsed or the $9 million of AMS funds are fully allocated.

Each applicant will be required to provide the information needed by AMS and CCPA to administer the Program, including, but not limited to, the location of the orchard from which trees will be removed, the total acreage to be removed, and the tonnage that was harvested from the applicable acreage in 2025. Following OMB approval, the necessary information will collected on an application form titled, “Application for Clingstone Peach Diversion Program.” Applicants must provide a Tax Identification Number (TIN) or Social Security Number (SSN), as well as a System for Award Management Unique Entity Identifier number (SAM UEI), to be eligible to participate or receive a diversion payment under the Program. SAM UEI numbers are assigned to growers after registering with the Federal Government via the SAM.gov website. Applicants will also certify that no tonnage has been, or will be, harvested in the 2026 crop year, that all equity holders in the participating acreage consent to the filing of the application, and that the land has not been, and will not be, sold for commercial development. Further, the applicant must agree not to replant clingstone peach trees on the same acreage for 10 years after the trees are removed, with consequences for non-compliance. CCPA will review each application for completeness and make every reasonable effort to contact growers to obtain any missing information prior to administrative rejection of the application.

Each approved applicant will be notified of their eligibility by CCPA on another form, “Notification of Clingstone Peach Tree Removal,” a form ( printed page 48242) also to be approved by OMB. Once tree removal is completed, the approved grower will be required to fill out a portion of the “Notification” form, certifying to CCPA and AMS that they removed the clingstone peach trees as agreed and the date of such removal, and verifying the correct grower contact and identification information (TIN or SSN, as well as SAM UEI). The remainder of the form will be completed by a CCPA staff member. The staff member will verify that the approved block of clingstone peach trees has been removed, list the equivalent 2025 tonnage removed from production, and indicate the total amount of money due to the grower. The AMS-funded payment to growers will be made via a Federal Government payment system. Growers will need to register their business entity (or entities) with the Federal Government as directed on the application form to receive payment. There will not be an alternative mechanism to pay growers outside of the designated payment system.

Under the Program, growers will be paid $175 per ton ($150 per ton from AMS and $25 per ton pledged from CCPA) based on their verifiable 2025 peach production from the acreage committed to the tree diversion program, provided that payments will not exceed $4,000 per acre (AMS and CCPA total). In addition, payments under the Program will not be less than $1,500 per acre (AMS and CCPA total), allowing some compensation for trees removed from acreage that have not yet achieved full production but otherwise meet all of the other Program conditions.

AMS will pay growers $150 per verifiable ton, subject to the aforementioned minimum and maximum amounts, via a Federal Government payment system. CCPA has pledged to pay growers an additional $25 per verifiable ton. All CCPA payments to growers will be made independent of the Government payment system. AMS has no authority to mandate or effectuate the CCPA pledge, and payments to growers, if made, will be made directly from CCPA to the growers, under such terms and methods as CCPA establishes.

To be eligible for the Program, trees must currently be bearing or be young trees of pre-bearing age that were planted under a contract. Dead trees, or previously abandoned orchards, will not be eligible to participate. Trees will have to be removed no later than 60 days following the date of approval by CCPA.

Growers who participate in the Program and subsequently replant clingstone peach trees in the same location within the 10-year period following removal of the trees will be required to refund all payments received to USDA, plus interest, on the replanted acreage. Because it takes new trees at least three years to be commercially productive, this provision will effectively remove the acreage covered under the Program from the commercial production of clingstone peaches for at least 13 years.

As previously stated, the Program is expected to reduce California clingstone peach acreage by at least 3,000 acres. Based on the most recent 3-year industry average annual clingstone peach yield of 16.6 tons per acre, removal of trees from 3,000 acres could reduce annual canned peach production by approximately 50,000 tons. The decrease in production from this one-time diversion program will help align supply of clingstone peaches with demand into the future while still ensuring that the market is adequately supplied. In addition, the Program will provide the clingstone peach industry with the economic opportunity to concentrate its efforts on rebuilding canned peach demand instead of coping with issues related to oversupply.

As noted earlier, AMS will provide $9 million to fund the Program, inclusive of administrative costs, with CCPA pledging an additional $1.5 million to be administered separately by CCPA. Applications will be approved until the allocated AMS and CCPA funds have been committed, or the 30-day application period has elapsed, whichever comes first. Each participating grower will have no more than 60 days following the date of approval by CCPA.

Based on the provisions of the Program, total payments to growers (both AMS and CCPA commitments) will range from $1,500 to $4,000 per acre, which is expected to cover most of the costs of removing the trees, as well as preparing the land for other uses. Under the Program parameters, even if a grower had a yield greater than 22.9 tons per acre on the acreage committed for removal, the payment to the grower will not exceed the maximum of $4,000 per acre ($3,429 from AMS funds and up to $571 from CCPA) as provided by this rule. Conversely, if a selected block of land had a 2025 yield of 8.6 tons per acre or less, or the acreage had not achieved maturity (young trees less than four years old which did not produce enough fruit to warrant harvesting), the grower will receive the minimum of $1,500 per acre ($1,286 from AMS funds and up to $214 from CCPA). The $175 per ton payment, as well as the upper and lower limits to the amount paid per acre, are considered necessary to help ensure that enough growers participate in the Program to achieve the stated goals. The costs of tree removal relative to participating in the Program may vary depending on the number of acres removed. Some cost savings may accrue to growers when larger blocks of acreage are removed under the Program.

According to CCPA, the estimated cost of tree removal, inclusive of the removal of roots and associated debris, field leveling and tilling, fumigation applications, and weed suppression management, are estimated to be approximately $2,800 per acre. As such, the $1,500-$4,000 per acre total payment authorized under the Program is expected to offset a significant portion of the cost associated with tree removal for a qualified grower participant. A participating grower's ability to plant alternative crops on the cleared acreage is considered an additional option that may help offset the cost of the Program. Grafting another type of tree, other than a clingstone peach tree, onto the remaining rootstock after the removal of the clingstone peach tree trunks will also be allowed under the Program, further expanding the commercial options for participating growers.

The current economic conditions within the industry, specifically weak demand, reduced per capita consumption of peaches, stagnant domestic shipments and exports, increasing low-priced imports, and declining grower prices and revenues are expected to limit the incentives for replanting acreage to clingstone peach trees in the near future, thus contributing to the justification of this Program.

Regulatory Flexibility Analysis

Pursuant to requirements set forth in the Regulatory Flexibility Act (RFA) (5 U.S.C. 601-612), AMS has considered the economic impact of this 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 business subject to actions in order that small businesses will not be unduly or disproportionately burdened.

At the time this analysis was prepared, the Small Business Administration (SBA) defined small agricultural producers of clingstone peaches as those having annual receipts equal to or less than $3,500,000 (NAICS code 111339, Other Noncitrus Fruit Farming). Meanwhile, small agricultural service firms are defined as those having annual receipts of equal to or less than $34,000,000 (NAICS code 115114, ( printed page 48243) Postharvest Crop Activities) (13 CFR 121.201).

In the 2022 Census of Agriculture, NASS reported a total of 468 clingstone peach producing farm operations in California, with 14,142 total acres. To calculate the number of small growers that meet the SBA definition of annual receipts equal to or less than $3.5 million, the amount of acreage required to produce the volume of peaches at an average price to reach $3.5 million must be estimated. For that purpose, NASS price and yield data for 2024 is the most recent available.

For 2024, the average California price for clingstone peaches was $0.314 per pound ($628 per ton) and clingstone peach average yield was reported at 33,200 pounds (16.6 tons) per acre. These figures are utilized to estimate the amount of acreage required to produce the volume of clingstone peaches to reach the SBA threshold of $3.5 million. To generate $3.5 million in annual receipts, at an average grower price of $0.314 per pound, a grower would need to produce 11,146,497 pounds of clingstone peaches ($3.5 million divided by $0.314 per pound equals 11,146,497 pounds). Given an average production of 33,200 pounds per acre, approximately 336 acres would be required for a clingstone peach grower to achieve $3.5 million in annual receipts (11,146,497 pounds divided by 33,200 pounds per acre equals 335.74 acres).

According to the 2022 Census, the number of clingstone peach acres harvested in California was 14,142 acres. Dividing the number of clingstone peach acres (14,142) by the estimated number of clingstone peach growers (468) yields average acres per farm of approximately 30.2 acres, which is considerably below the estimated 336 acres required per grower to generate $3.5 million in sales. Thus, the majority of the 468 clingstone peach farms counted in California by the 2022 Census may be considered small entities by the SBA standard.

NASS data also show the total value of utilized clingstone peach production was $144.3 million in 2024. Given that there were only two clingstone peach processing entities in operation in California in 2024, and that only one entity is currently in operation in the state, a reasonable assumption would be that the one remaining clingstone peach processor would be considered a large entity based on the SBA definition of having annual receipts of equal to or less than $34 million.

This rule reestablishes provisions under the clingstone peach diversion program (7 CFR 82) for the 2026 to 2036 period. Authority for the Program is provided in clause (3) of section 32 of the Act. Participation in the Program is voluntary, so individual growers, both large and small, can weigh the benefits and costs of the Program before deciding whether to participate.

Economic Assessment of the Diversion Program

To assess the potential impact that the Program could have on prices growers receive for their product, two potential options were considered: Abandonment, and continued production. Projected grower prices and inventories were calculated assuming the implementation of the Program and comparisons were then drawn between the potential economic benefits and costs of this implementation and the status quo alternative were no such Program implemented.

The analysis assumes that approximately 3,000 acres of clingstone peach orchards will be removed through the Program. Considering all factors, this is expected to result in the reduction of bearing acreage from 13,261 in 2025 to approximately 11,000 acres by 2028. That estimate is derived by taking the 2025 crop year bearing acreage of 13,261, subtracting the Program acreage (3,000 acres), adding in recently established acreage that was previously under contract and is expected to begin bearing fruit in crop year 2028 (2,000 acres), and removing additional acreage that is expected to be taken out of production by growers outside of the Program (1,261 acres) (13,261 current acres minus 3,000 tree pull acres plus 2,000 acres of new bearing trees minus 1,261 acres removed outside of the Program equals approximately 11,000 acres of bearing clingstone peaches in crop year 2028).

Under the Program provisions reestablished herein, acreage is estimated to be reduced to 11,000 acres in 2028. It is assumed that there will be no economic incentive to plant clingstone peach trees outside of the Program, given the expected market outlook, that might add to that acreage estimate. Further, demand for clingstone peaches is estimated to be equal to what can be produced on 11,000 acres moving forward, potentially creating supply and demand equilibrium.

Prior to its bankruptcy filing in July 2025, Del Monte Foods had contracted 4,650 acres of clingstone peaches for canning. Using 2024 yield data from NASS of 16.6 tons per acre, and $628 price per ton, the total value of production delivered to Del Monte may be estimated at $48,475,320 (4,650 acres times 16.6 tons per acres times $628 per ton equals $48,475,320 total value of production).

In 2017, the University of California, Davis (UC Davis) published a cost of production study for clingstone peaches. UC Davis is currently working on an updated study considering the recent increase in cost of inputs, however, that study is not yet available as of the publication of this rule. Based on the 2017 UC Davis study, the cost of production per acre of clingstone peaches is $8,825. Using this per acre cost of production estimate, the cost of production for the 4,650 acres contracted by Del Monte Foods may be estimated at $41,036,250 ($8,825 per acre times 4,650 acres equals $41,036,250). Using the estimated total value of production ($48,475,320) and estimated total cost of production ($41,036,250), total calculated returns to growers using that data would have been approximately $7,439,070 ($48,475,320 minus $41,036,250), or nearly $1,600 per acre ($7,439,070 total returns divided by 4,650 acres equals $1,599.80 return per acre).

The bankruptcy of Del Monte Foods leaves only one buyer of California clingstone peaches for canning, Pacific Coast Producers (PCP), which is cooperatively owned by growers. CCPA reports that PCP has contracted 10,400 acres of clingstone peaches for 2026 from both its members and independent growers. The 10,400 contracted acres is the maximum that PCP can process through its two canning facilities. Based on CCPA estimated total number of acres at the beginning of 2026, that will leave approximately 3,500 acres of clingstone peach production with no buyers without intervention (13,900 total acres of clingstone peaches minus 10,400 PCP contracted acres equals 3,500 acres).

Prior to its bankruptcy, Del Monte Foods had contracted with growers to plant additional acreage of clingstone peaches in the hopes of expanding production. CCPA has indicated that there are an additional 1,400 acres of clingstone peaches that have not reached full production to date. Total acreage of clingstone peaches incurring costs but without contracts is estimated to be 4,900 acres (3,500 acres in production plus 1,400 acres planted not in production equals 4,900 acres).

Clingstone peach growers without a contract may face difficulty finding a buyer for their peaches. According to NASS, the 2022-2024 three-year average of the total production of clingstone peaches sold in the fresh market was less than one percent. With so many clingstone peach acres without a processor contract for 2026, prices are ( printed page 48244) expected to decrease significantly for any alternative market outlet for such peaches due to oversaturation of the market.

Additionally, in October 2025, California's Assembly Bill 732 (AB 732) became effective, which authorizes county agricultural commissioners to penalize owners of neglected or abandoned orchards that become public nuisances, such as breeding environments for pests or diseases. Under AB 732, if landowners are found to have neglected or abandoned their orchards, landowners can face fines of $500 to $1,000 per acre.

In considering the potential economic environment for clingstone peaches without a tree pull program, AMS reviewed two possible options that growers without contracts may consider for the 2026 crop year; (1) abandonment of peach orchards, and (2) producing clingstone peaches without a processor contract. Analysis of the two options follows:

Option 1: Abandonment

Growers decide to abandon their clingstone peach orchards. Abandonment would result in the smallest economic cost/loss to the growers as growers would not incur any variable production costs, but there would still be fixed costs and fees associated with owning the land such as taxes and insurance. UC Davis estimates those fixed costs at $298 per acre. Factoring in that AB 732 can fine growers $500 to $1,000 per acre for neglecting or abandoning their orchards, growers may incur a loss of between $798 to $1,298 per acre ($275 property tax plus $23 property insurance equals $298 cost per acre; add $500 AB 732 fine equals $798 total cost per acre or $1,000 AB 732 fine equals $1,298 total cost per acre).

Therefore, the total industry cost/loss of Option 1 could range from a lower bound estimate of $3,910,200 ($798 total cost per acre times 4,900 acres equals $3,910,200 total loss) to $6,360,200 ($1,298 total cost per acre times 4,900 acres equals $6,360,200 total loss).

Option 2: Continued Production

Growers decide to continue to produce clingstone peaches. This option would most likely result in the largest loss to the growers. Growers would incur the full cost of production ($8,825 per acre) with limited market options. That cost could be reduced if the fruit was produced but not subsequently harvested (reduced by the $1,627 harvest cost). Assuming insignificant returns from possible sales, and most fruit abandoned, Option 2 could have the potential for a total industry loss of $35,270,200 ($8,825 cost of production per acre minus $1,627 cost of harvest equals $7,198 cost of non-producing acres times 4,900 acres equals $35,270,200 total industry loss).

The economic effect of the Program, on a per acre basis, is expected to dramatically reduce losses and bring grower returns closer to a break-even level. With the level of imports anticipated to continue to increase, and with the level of exports and domestic demand anticipated to continue to decrease, it is assumed that there will not be an economic incentive to expand production after implementation of the Program. It will remain up to the growers to control costs and to expand demand to ensure their longer-term economic stability.

In addition to the direct impact a tree removal program is expected to have on grower price and revenue, there are other indirect impacts. By design, a tree pull program assists an over-supplied industry by decreasing the volume of fruit that is produced. Without a tree removal program, large quantities of clingstone peaches could continue to be produced, and even harvested, but may not be utilized by processors. Growers would have to cover the total cost of production, harvest, and transportation, but would likely only receive payments on fruit that is actually canned. Further, in an attempt to sell the excessive inventories, packers might reduce wholesale prices, which in turn leads to market share battles and lower prices being passed back to growers. A more balanced supply and demand situation will allow growers and packers to jointly continue developing markets in ways that benefit the entire industry.

Costs and Benefits of the Program

CCPA projects the cost of removing a clingstone peach tree is $20, or approximately $2,800 per acre. The cost estimate excludes the establishment of a new irrigation system (if necessary for alternative crops) and the cost of establishing an alternative crop. The projected cost to remove 3,000 acres of clingstone peaches is $8.4 million (3,000 acres times $2,800 removal cost per acre equals $8.4 million).

Economic assessment of the Program indicates that it is expected to benefit growers (particularly small, under-capitalized growers), processors, and others associated with the clingstone peach industry. The Program is expected to remove 3,000 or more acres of clingstone peach production. At that level, CCPA projects that growers will be paid approximately $8,715,000 in total (3,000 acres times 16.6 yield per ton times $175 per ton equals $8,715,000), which should cover the majority of the growers' tree removal expense.

Administrative Cost of the Program

The major direct cost of the Program will be the payment to growers for removing their clingstone peach trees. A total of $9 million, less the costs associated with local administration of the Program by CCPA, will be made available by AMS for the Program. Administrative costs for reviewing applications and verifying tree removal are expected to be about $125,000. Major expense categories for administration of the Program include costs for salaries and benefits, vehicle rental and maintenance, and insurance, overhead, and supplies.

Total grower costs associated with the completion of the Program applications, payment requests, and record maintenance for the period specified after tree removal are expected to be about $2,327.

Overall Assessment of the Program

Payments made under this Program will help California clingstone peach growers by addressing the oversupply problem that is adversely impacting their industry. Reestablishing the peach tree diversion Program is expected to reduce excess supply more quickly than if the industry relied on market forces alone. While market forces could also result in supplies being reduced, such an adjustment may occur more slowly, with resultant economic hardships for growers and processors. In addition, the Program may be beneficial in reducing the risk of loan default for lenders that financed clingstone peach growers and could also help small, under-capitalized growers stay in business. Such small growers are often efficient, but do not have adequate resources to continue to operate given the current depressed conditions within their industry.

The total cost for the Program will be $10.5 million ($9 million provided by AMS and $1.5 million pledged by the industry) with the bulk of those funds to be paid to growers, and a small amount going to CCPA for reimbursement of administrative costs. Additionally, the aggregate total cost to all growers is an estimated $2,327 for compliance with the application and record-keeping requirements of the program.

The estimated average benefit to growers available under the Program to compensate for tree removal is a total of $2,607 per acre. This is calculated by determining the difference between the Program payment per acre and the ( printed page 48245) growers fixed cost per acre ($175 per ton times 16.6 yield per ton equals $2,905 per acre Program payment; $275 property tax per acre plus $23 property insurance per acre equals $298 grower fixed costs per acre) ($2,905 minus $298 equals $2,607). The Program is expected to result in a benefit for the growers who participate in the program, assuming no additional variable costs are incurred, and help offset the costs associated with tree removal. While the Program is not expected to generate positive net returns for growers in the short run, the long-term viability of the industry will be strengthened under the Program.

This cost calculation assumes that the acreage on which trees are removed remains idle, and that growers will therefore absorb all fixed costs on that acreage. To the extent that the land is put to other productive uses, growers will not be absorbing all fixed costs of producing clingstone peaches, and grower benefits will be higher. If growers could earn more income from alternative crops, it follows that processors would be forced to pay more to obtain the peaches from the growers. These higher costs could be passed on to consumers through higher retail prices or could be absorbed as reduced operating margins for processors, wholesalers, or retailers. Adjustments in retail prices, as well as retailer and processor margins, are anticipated to change with or without the Program.

Another cost of the Program is the reduced economic activity due to the growers purchasing fewer inputs (labor, chemicals, etc.) because of the reduction in the number of clingstone peach acres managed and harvested. Farm laborers and agricultural supply firms such as chemical manufacturers and distributors could realize less revenue because of the reduced need for their services and goods. To the extent that acreage removed may be replanted to alternative crops, the costs associated with removal could be offset by purchases of labor and supplies to produce such alternative crops. However, the total cost of the Program is difficult to quantify and is not included in this analysis.

Conclusion

Based on all available information, USDA has determined that there is a systemic surplus of clingstone peaches in the market, there is excess clingstone peach production capacity, and reestablishment of growers' purchasing power will be encouraged by using section 32 funds to reduce clingstone peach production capacity under this Program. USDA has further determined that the Program, as reestablished herein, will be a long-term solution to the perpetual oversupply situation that exists in the clingstone peach industry and will provide financial relief to growers.

Each grower participating in the Program will be required to agree to not replant clingstone peaches on the land from which the trees were removed for 10 years following the date the trees are removed. The grower's commitment to not replant peach trees on the Program approved land is a guarantee by the participant that no one (and not just the participant) will replant the land to clingstone peaches for the agreement period. Only those persons who are current owners of the land, and have not contracted to sell the land, will be eligible to participate in the Program. Participating growers must guarantee that they have not made prior arrangements to sell the land, or to remove the trees from the land but retain ownership for non-agricultural commercial purposes like shopping centers, housing developments, or similar purposes. Inclusion of such non-agricultural land in the Program will not serve the expressed purposes of the Program.

A 60-day comment period is provided to allow interested persons the opportunity to respond to this interim rule, including any regulatory and informational impacts of this action on small businesses. This interim rule will have immediate effect so that those clingstone peach growers who choose to participate in the Program can implement individual tree removal plans in a timely manner and can plant alternative crops, if they so choose, on the acreage where peach trees are to be removed within the 2026 crop year. The Program is voluntary in nature and there is not any regulatory burden associated with this rule. All written comments received within the comment period will be considered before a final determination is made on this matter.

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 interim rule.

After consideration of all relevant material presented, including the information and recommendations submitted and other available information, AMS has determined that this interim rule is consistent with, and will tend to effectuate the purposes of, the Act.

Good Cause Analysis

Pursuant to 5 U.S.C. 553, it is also found and determined upon good cause that it is impracticable, unnecessary, and contrary to the public interest to give preliminary notice prior to putting this rule into effect and that good cause exists for not postponing the effective date of this rule until 30 days after publication in the Federal Register . This rule makes funds available to producers that will facilitate the removal of clingstone peach trees to reduce canning peach production. Participation in the Program is voluntary, has no regulatory effect, and was re-established following a request from the clingstone peach industry.

It is necessary for this rule to be immediately effective due to the peach growing season. Clingstone peach growers, who are under severe downward economic pressure due to chronic oversupply, are currently making decisions regarding their peach production and alternative cropping plans. The availability of this diversion program will materially influence those decisions. The cropping season in the production area has already started, and any delay in implementing the Program could limit the options that producers have at their disposal and may negatively impact economic outcomes, as has already been evidenced by the series of cannery closures over the last fifteen years. Further, clingstone peach growers are not only aware of this action but have requested it and are anticipating its enactment. Finally, this rule provides a 60-day comment period and any comments received will be considered prior to finalization of this rule.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35), AMS will request OMB approval of the collection of information under the USDA Generic Solution for Solicitation for Funding Opportunity Announcements—OMB form number 0503-0028. This information collection is a generic collection used by USDA for one time funding opportunity announcements. Since the agency does not need to collect new information, such as progress reports, beyond the expiration of this generic information collection, set to expire October 2027, there is no need to submit a regular generic information package.

For the reasons set forth in the preamble, AMS amends 7 CFR part 82 as follows:

91 FR 48239