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Federal Register / Vol. 86, No. 90 / Wednesday, May 12, 2021 / Proposed Rules figures imply that 488 purchased heifers are transitioned rather than managed organically from the last third of
gestation under our 25 percent assumption, and 975 are transitioned
heifers under our 50 percent assumption.

TABLE 3HEIFER PURCHASE AND SALES PRICE AND RELATED STATISTICS BY DAIRY FARM SIZE AND ORGANIC STATUS
ARMS
149

4999

100199

200+

All
Organic and Organic Transitioning Farms Number of Farms in ARMS Survey
Largest Number of Cows Milked
L. Heifers Sold Head
Sold L Heifers $/Head
% of Farms Purchasing L. Heifers
Purch. L. Heifers as a % of Herd

144
33
0.31
$1,350
8%
1.5%

114
68
0.84
$1,993
16%
1.0%

42
132
0.60
$2,111
10%
1.3%

32
499
8.02
$1,918
7%
0.2%

103
1.27
$1,887
11%
0.7%

1.37
$1,161
7.2%
1.0%

1.73
$1,304
4.8%
0.8%

9.68
$989
12.1%
3.2%

5.5
$1,012
3.3%
2.9%

Other Farms
khammond on DSKJM1Z7X2PROD with PROPOSALS

L. Heifers Sold Head
Sold L Heifers $/Head
% of Farms Purchasing L. Heifers
Purch. L. Heifers as a % of Herd

We also used the 2016 ARMS data to estimate the price difference between organic replacement animals and nonorganic replacement animals. Table 3 shows the price at which organic and transitioning dairies sold large replacement heifers. Because the price of transitioned heifers compared to lastthird-of-gestation organic heifers is not available, our analysis uses the cost of non-organic large heifers as a substitute.
This is likely to exaggerate the cost differential. The large heifer selling price of $1,887 at organic and transitioning dairy farms was $865 more than the selling price of $1,012 at nonorganic farms. Across individual farm size categories, however, this difference in prices between organic and nonorganic selling prices varied across size categories, ranging from $750 farms with 049 cows to $937 200+ cows.
Based on the data, our analysis assumes that before the imposition of any of the proposed changes, a transitioned heifer costs $1,000 and an organic heifer costs $2,000 so that the difference in price between the two animal types is slightly higher than the largest difference observed in the data.
Related data and public comments support these assumptions on price relationships. The approximately $1,000
price of non-organic bred heifers our substitute for the price of a transitioned animal is supported by livestock auction market prices at five sites 29
29 This includes data collected in the AMS
Livestock and Replacement Cattle Reports reported at https www.ams.usda.gov/market-news/feederand-replacement-cattle-auctions for the following five auctions: Mid-Georgia Livestock, Jackson, GA;
Empire Livestock, Cherry Creek, NY; Mammoth Cave Dairy Auction, Smiths Grove, KY; New
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1.14
$600
3.3%
0.2%

collected by AMS in November of 2019.
These data show that bred heifers in the third trimester i.e., springers of supreme and approved quality sold for $1,045.
Additionally, the assumptions are supported by public comments that indicate it costs between $600 and $1,300 more to raise an organic calf than a nonorganic calf.
The increased demand for 975
additional organic from last third of gestation replacement heifers under the 50 percent transitioning assumption or 488 additional organic replacement heifers under the 25 percent transitioning assumption is not expected to lead to a large increase in their price because many of the key inputs to producing those organic replacement heifers can be readily expanded. These inputs include organic heifer calves, additional organic feed, and additional organic pasture land.
Because heifer calves are often sold for meat rather than milk production, the number of these animals that might be re-directed into milk production is far less than their total availability, a situation providing a strong check on price increases for that input. Moreover, the additional organic pasture and additional feed required for 975
additional organic replacements are relatively small compared to the existing requirements for the 103,000
heifers currently retained by organic farms for their own replacements.
However, this analysis assumes that the increased demand for organic replacement heifers pushes up their Holland Sales Stables, New Holland, PA; and Toppenish Monthly Dairy Replacement Sale, Toppenish, WA.

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price by $500, or 25 percent,30 to $2,500. In this case, the total cost of purchasing replacement heifers by organic dairy farms would be $4.875
million per year 1,950 replacements animals purchased from off farm at $2,500 per head. This would be the new total cost of purchasing organic heifers rather than the additional cost of purchasing organic heifers, which is considerably less.31
Table 4 shows the estimated costs to and intra-industry transfers between organic dairy farms purchasing organic heifers under alternative assumptions on price response and replacement heifer purchases that would follow the proposed rule. Industry transfers are costs to a set of dairy farms that are exactly offset by benefits to another dairy farm. In the case of the proposed rule that would affect organic dairy farms, such transfers would occur because farms that are currently net sellers of organic heifers see sales revenue increase from price increases for organic heifers should the rule be enacted, even as net buyers of organic cattle see their costs increase. If the price of organic heifers does not increase, then no transfer would occur.
AMS expects that organic dairy farms will purchase 1,950 replacement heifers per year based on our analysis of ARMS
data. If the price of organic dairy heifers were to be unchanged following the rule, our analysis finds that total costs would increase by $975,000 per year 30 A 25 percent price increase resulting from a 50
percent increase in quantity supplied is consistent with an elasticity of supply of 2.
31 These costs reflect only those for dairy cattle.
Costs for purchasing dairy sheep and goats are not included in this analysis.

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