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Federal Register / Vol. 86, No. 90 / Wednesday, May 12, 2021 / Proposed Rules
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rule. In some cases, organic dairy operations source their transitioned heifers from off-site heifer-raising operations. Here, we discuss the potential effects of the proposed rule on these operations.
A 2011 USDA NAHMS study on heifer-raising operations 32 found that most heifers sent to heifer-raising operations 80 percent are returned to their dairy of origin. The study also found that most heifer-raising operations receive weaned calves rather than wet calves and send them back as pregnant heifers. In the 2015 proposed rule, AMS specifically requested comments and data on the likely impacts on heifer-raising operations. We did not receive any data on the number of heifer-raising operations that continually transition animals for sale to organic dairies or on the number of animals raised by such operations annually. Aside from fragmentary evidence in the AMS Organic Integrity Database, AMS does not currently have specific data on the locations, numbers, or sizes of organic heifer-raising operations.33
In the absence of specific information, we considered that organic dairy operations could be using organic heifer-raising operations to transition animals on a continual basis by taking in nonorganic weaned calves e.g., 12month old heifers and providing organic management for 12 months before returning the pregnant organic heifers to an organic dairy.
Under the proposed rule, heiferraising operations would not be required to change their animal production practices. These operations are certified organic and currently manage animals in compliance with the USDA organic regulations as a requirement of their organic certification. However, the proposed rule would not allow any operations, once certified, to continually source nonorganic animals. Therefore, these operations would be able to accept only weaned calves that had been managed organically from the last third of gestation.
32 USDA, Animal Plant Health Inspection Service.
Dairy Heifer Raiser, 2011 October 2012. Available online at: https www.aphis.usda.gov/aphis/
ourfocus/animalhealth/monitoring-andsurveillance/nahms/nahms_dairy_studies.
33 The Organic Integrity Database includes descriptions of the products for which organic farms are certified as recorded by the certifying agent. It lists 220 operations that recorded dairy cattle but not milk production i.e., a possible indicator for a heifer-raising operation. These operations were often identified as being involved with dairy cows, breeding operations, and replacements. Unfortunately, the database does not provide sufficient information to use in our analysis of heifer-raising operations.

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Within our analysis, we have assumed that competitive markets for both transitioning and replacement heifers have resulted in prices for these animals that are sufficiently high enough to allow sellers to recover the cost of raising these animals along with a normal rate of return on capital investment. The analysis assumes that the 50 percent conjectured increase in price of organic replacement heifers is sufficient to simultaneously ensure that markets clear i.e. quantity supplied equals quantity demanded at the higher number of transacted animals and offset the increased costs to supplying more animals.
As with other aspects of our analysis regarding supply response, AMS
assumes that the ability of individual sellers of replacement heifers to adjust management practices to market conditions will vary with the sitespecific characteristics of operations, such as their ability to find new buyers and access to additional organic pasture.
Whether heifer-raising operations will increase or decrease sales of organic heifers following the implementation of the rule cannot be determined with the available data.
Effects on Consumers Most dairies report that they source at least some of their replacement cows from their own calves, and only 11
percent of all dairies purchase replacement heifers, with less than 1
percent of all replacements being purchased from off the farm. The majority of producers that do not purchase replacement heifers would not see an increase in costs. To replace purchased transitioned heifers, dairies would have to either raise their own replacements or buy them from an operation that sells organic from last third of gestation replacement heifers.
Since the current supply of replacement heifers can be increased without large price increases, as detailed above, it is unlikely that the proposed rule would significantly increase milk production or milk costs to the consumer. Some commenters to the 2015 proposed rule suggested that the limits on transitions would increase the price of organic milk for consumers. They noted that with the proposed limits on transitions, organic growth for existing organic dairy farms would be biologically capped at 5
percent. Any additional growth would need to come from new organic dairy farms or nonorganic dairy farms transitioning to organic milk production. These commenters stated that the price of organic milk for consumers could rise if demand
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approached the hard limit for dairy cattle growth.
For additional discussion, see our response to comments on Effect on consumer milk price above.
Benefits of the Proposed Rule The proposed rule would provide producers and consumers of organic foods with multiple types of benefits.
First, the rule would give specificity and clarity to the enforcement of regulations relating to the origin of dairy livestock and the management of breeder stock, Second, the rule would create uniformity in the application of the USDA organic regulations by generally requiring organic management for an animals entire life. Together, these may enhance the value of organic premiums that consumers are willing to pay for milk certified under the USDA organic regulations by reducing uncertainty.
The 2016 NASS Certified Organic Production Survey show that U.S. farms and ranches produced and sold $7.6
billion in certified organic commodities, up 23 percent from 2015. At the retail level, the OTA 2019 U.S. Industry Survey found that retail sales of organic production totaled $52.5 billion, 6
percent above the previous year.
Organic dairy cattle producers who sell organic dairy females may receive a benefit as part of an intra-industry transfer. AMS estimates that on the high side, the price of an organic springer may increase by $500 over current prices due to increased demand. If this price increase were to occur, dairy producers who are net sellers of replacement springers would benefit through the intra-industry transfer.
AMS does not expect the proposed rule to increase demand for organic milk. However, AMS does expect the proposed rule to help support consumer confidence by preventing organic dairies from continuing to transition non-organic animals into organic milk production. The sustained demand should be valuable for organic milk producers and strengthen the value of the organic brand in the mind of consumers; these outcomes are not benefits in themselves, as that term is defined for purposes of Executive Order 12866 and OMB Circular A4, but to the extent that they disincentivize the costly establishment of credentials that are alternative to USDA organic certification, the associated cost savings qualify as rule-induced benefits.
Alternatives Considered As required by Executive Order 12866, AMS considered alternative regulatory approaches in our development and analysis of the
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