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Federal Register / Vol. 86, No. 90 / Wednesday, May 12, 2021 / Proposed Rules TABLE 1ORGANIC DAIRY MARKETRETAIL SALES BY SUBCATEGORYContinued 2019 Sales $ M

Subcategory
2019 Growth
Percent of organic dairy sales a
Avg. markup b %

Organic markup c $ M

Ice Cream

118

1.3

2.0

100

118

Total

5,769

1.7

100.0

47

1,808

a The
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Organic Trade Associations 2019 Organic Industry Survey p. 80 included eggs as a subcategory for its summary on organic dairy sales, but we have excluded the data on eggs from this table.
b USDAs AMS weekly reported prices in the 2020 weekly dairy retail report based on the first weekly report in January, April, July, and October. These reports are available at: https www.ams.usda.gov/market-news/dairy. Average prices of product categories are averages across the four periods weighted by store counts. Markups are calculated as the: Organic PriceConventional Price/Conventional Price.
c The dollar value of the organic markup for each category is: Organic Sales Markup/1+Markup.
d The yogurt and butter, sour cream and cottage cheese markups are respectively the average of the markups of four yogurt products and butter, sour cream and cottage cheese products, weighted by counts of stores advertising organic products. Cheese markups are for natural varieties in 8 oz. blocks.

Table 1 also includes markups in the prices of dairy products marketed as organic versus conventional or nonorganic products. For dairy products, the average organic markup was 47 percent and totaled $1.8 billion in value.13 In market equilibrium, this markup reflects both the higher costs of organic production and the value consumers place on organically labeled products and their various underlying attributes. While AMS does not have estimates of the specific values of each attribute, the agency assumes that adjustments to the organic production standards that would reduce production costs must be simultaneously weighed against those adjustments potential to affect markups.
The 2016 NASS Organic Production Survey estimated that U.S. had approximately 2,559 certified and exempt organic dairy farms that milked a peak of 279,021 cows in 2016.14 These organic dairy farms had milk sales of nearly $1.4 billion in 2016. Despite the more recent sales declines, total organic milk production in the United States increased to 4.0 billion pounds in 2016, representing an 18.5 percent increase in production from 2015 and 44.5 percent increase since 2011. In that same time frame, the number of certified organic farms grew 1 percent over 2015 2,531
farms in 2015 and grew 41 percent compared to 2011 1,812 farms in 2011.
In comparison, the Organic Integrity Database 15 identified approximately 3,516 organic livestock operations certified for production in January of 2020 that included dairy, milk, cow, cattle in their description of 13 National Retail ReportConventional vs Organichttps usda.library.cornell.edu/concern/
publications/000000043?locale=en.
14 USDA NASS. 2017. Census of Agriculture 2016 Certified Organic Survey. Available online at:
https www.nass.usda.gov/Surveys/Guide_to_
NASS_Surveys/Organic_Production/.
15 The Organic Integrity Database is available online at: https organic.ams.usda.gov/Integrity/.

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operations.16 Of these operations, 49
operations were identified as operations milking goats or sheep and not bovine animals. An additional 286
were breeders, replacement heifer operations, or cull cattle handlers, all of which did not indicate that they produced milk. In all, the 3,181 farms in this database are likely to produce organic milk and be affected by the rule through their organic replacement heifer purchases.
AMS decided to use the 2016 NASS
data for our analysis for the following reasons. Primarily, the Organic Integrity Database does not track the number of organic dairy cattle maintained by certified operations. Absent information indicating a higher population of dairy cattle compared to NASS data, an upward adjustment of farm numbers alone, without an adjustment of animal numbers, has little effect on our analysis. Secondly, the NASS survey of organic production records the number of organic dairy cows even if it does not necessarily classify the farm owning them as a dairy farm. This could undercount the number of operations, but not the number of organic dairy animals. Lastly, the Organic Integrity Database may overcount the number of operations that are actively engaged in dairy farming because mixed use farms may obtain additional certifications if they intend to handle organic dairy cattle but are not actively engaged in it.17
Organic Dairy FarmsCharacteristics and Distribution Organic dairy farms are, on average, smaller than conventional dairy farms.
NASS Certified Organic Surveys Agriculture show that the number of 16 Data was filtered for operations certified for livestock scope with certified livestock or handling products that include terms milk or dairy.
17 For instance, these operations may become certified for dairy so that they can manage organic dairy animals under favorable market conditions.

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milk cows owned by organic dairy farms averaged 116 head in 2011, 106 head in 2015, and 109 head in 2016. In contrast, NASS Census of Agriculture showed the number of milk cows for conventional dairy farms averaged 144
head in 2012 and 175 head in 2017.
Organic dairy farms also have lower yields, on average, than conventional dairy farms. The 2016 Survey of Organic Agriculture showed that each organic cow produces about 14,461 pounds of milk annually, or 48 pounds per day over a 300-day lactation period. NASS
production data for 2018 shows that across all operations conventional and organic average production is 23,149
pounds of milk per animal annually, or 77 pounds per day over the same 300day period. Despite higher production costs and lower yields, organic dairy farms can be economically viable through the price markups they receive over conventional milk and milk products. Table 1 shows that the average markup for organic milk products averaged 47 percent at the retail level.
Based on the 2016 NASS Survey of Organic Production Data, Table 2 shows that the highest concentration of organic dairy farms is in the Northeast and Upper Midwest regions,18 but that large organic dairy farms in California and Texas represent a large share of output.
The five States with the largest number of certified organic dairy farms Wisconsin, Pennsylvania, New York, Ohio, and Indiana accounted for 65.7
percent of the total farms. However, those States represented less than 30
percent of national organic milk production.
By contrast, the West and South Central regions accounted for the highest milk production per farm. The two highest organic milk producing States California and Texas 18 USDAs Certified Organic Production Survey available online at: https www.nass.usda.gov/
Surveys/Guide_to_NASS_Surveys/Organic_
Production/.

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