Handlers of grapes grown in southeastern California will see a reduction in their regulatory costs starting this year, as the U.S. Department of Agriculture (USDA) has approved a lower California grape assessment rate to better align the industry’s financial reserves with federal guidelines.
The new rule, issued by the Agricultural Marketing Service (AMS), drops the assessment from $0.040 to $0.030 per 18-pound lug. This 25% decrease is effective on and after January 1, 2025, and will remain in place for the 2025 fiscal period and subsequent periods unless further modified.
The decision follows a unanimous recommendation from the local administrative committee, which comprises grape producers, handlers, and a public member. During a meeting on November 12, 2024, the committee voted 8-0 in favor of the lower rate, citing a need to draw down existing reserve funds to stay within the limits authorized by the governing marketing order.
Balancing the Books: Budget and Reserves
The assessment is essentially a fee used to fund the administration of Marketing Order No. 925, which regulates the handling of grapes in the designated southeastern California region. While the assessment rate is decreasing, the committee’s overall spending is projected to rise. The budgeted expenditures for the 2025 fiscal period are set at $88,600, an increase from the $77,000 budgeted for 2024.
To cover this gap while lowering the cost for handlers, the committee will utilize its financial reserve. The reserve currently holds approximately $110,000. By lowering the assessment rate, the committee expects to generate roughly $60,000 in revenue from an estimated 2,000,000 18-pound lugs, pulling the remaining $28,600 from the reserve to meet the $88,600 budget.
| Metric | 2024 Fiscal Period | 2025 Fiscal Period |
|---|---|---|
| Assessment Rate (per 18-lb lug) | $0.040 | $0.030 |
| Budgeted Expenditures | $77,000 | $88,600 |
| Projected Volume (18-lb lugs) | 2,000,000 | 2,000,000 |
Impact on Small Businesses and Producers
The USDA’s Regulatory Flexibility Analysis indicates that the move primarily benefits small entities. The production area consists of approximately six producers and six handlers. While most producers in the region are classified as large entities based on annual receipts exceeding $4 million, the majority of handlers fall under the Small Business Administration’s threshold for small agricultural service firms, which is $34 million in annual receipts.
The financial impact on the industry is relatively marginal but precise. Based on a projected average producer price of $13.11 per 18-pound lug for the 2025 period, the new assessment represents approximately 0.23% of total producer revenue. Although the assessment is technically imposed on handlers, the USDA noted that some of these costs may be passed through to the producers, though such costs are typically offset by the broader benefits of the marketing order’s operation.
Navigating Procedural Challenges
The path to the final rule was not entirely without friction. During the public comment period, the AMS received five responses. While three supported the proposal, one commenter challenged the procedural sufficiency of the rulemaking. The objector claimed the AMS had bypassed necessary “notice and comment” requirements and failed to provide a complete analysis of the impact on small businesses.
The AMS rejected these claims, asserting that all statutory requirements under the Administrative Procedure Act and the Regulatory Flexibility Act were met. The agency pointed to the public nature of the committee meetings and the formal publication of the proposed rule as evidence that interested parties had ample opportunity to participate and express their views.
What This Means for the Region
For the grape industry in southeastern California, this adjustment represents a routine but necessary piece of regulatory housekeeping. Marketing orders are designed to be flexible, allowing local committees to adjust budgets and rates based on the actual costs of goods and services in their specific area.
The current rate of $0.030 is intended to remain in effect indefinitely. However, the committee will continue to meet regularly to review expenditures and determine if further modifications are required. These meetings remain open to the public, ensuring that producers and handlers can influence future financial decisions.
The next confirmed step for the industry is the continued monitoring of the 2025 fiscal period’s expenditures, with the AMS reviewing the budget as the year progresses to ensure the financial reserve remains within the maximum permitted level—roughly one fiscal period’s worth of expenses.
This article is for informational purposes only and does not constitute legal or financial advice regarding federal marketing orders or agricultural regulations.
Do you work in the California grape industry? We invite you to share your thoughts or experiences with these regulatory changes in the comments below.
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