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Federal Register / Vol. 86, No. 90 / Wednesday, May 12, 2021 / Proposed Rules
of such entities and any increased costs for those entities.
The Small Business Administration SBA defines small agricultural service firms, which include certifying agents, as those having annual receipts of less than $8,000,000 13 CFR 121.201.
There are currently 78 USDA-accredited certifying agents; based on a query of NOP certified organic operations database, there are approximately 47
certifying agents who are currently involved in the certification of organic dairies. Of those 47 certifiers, 14 are State governments, 2 are county governments, and 1 is a large State university. AMS believes that none of these 17 public entities would meet SBA criterion for small agricultural service firms, but that the 29 other private certifying agents would. While certifying agents are small entities that would be affected by the proposed rule, we do not expect that these certifying agents would incur significant costs as a result of this action. Certifying agents already must comply with the current regulations, e.g., maintaining certification records for organic dairy operations.
For the regulatory flexibility analysis, AMS focused on estimating how different size organic dairy operations small versus large would be impacted as a result of purchasing all organic dairy replacement animals. As defined
by SBA 13 CFR 121.201, small agricultural producers are those having annual receipts of less than $1,000,000.
AMS used this SBA criterion to identify large organic dairy operations, those with cash receipts of more than $1,000,000, and small operations, those with cash receipts of $1,000,000 or less.
Data on the exact shares of organic dairy farms that have sales above and below $1,000,000 are not available.
However, ARMS data indicates that the average sales revenue of dairy farms from sales of organic milk and animals is $2,855 per milked cow, a figure that indicates that revenues exceed $1,000,000 for farms with more than 350
head.
Within the 2016 ARMS data, 90
percent of dairy farms 300 of the 332
had fewer than 200 milking animals.
Lacking more detailed information, we assume that 92 percent of all organic dairy farms or 2,354 of 2,559 qualify as small businesses under the SBA
standard. We also assume that these farms purchase replacement heifers in the same pattern as the average farm with 200 or fewer head. In this case, small organic dairy farms purchase 0.7
replacement heifers on average, with the 11.3 percent of small farms that purchase replacement heifers buying 6.6
head on average. In contrast, large organic dairy farms purchase 0.8
replacement heifers on average, with the
6.8 percent of large farms that purchase replacement heifers buying 12.3 head on average.
For this cost analysis, we assumed that the difference in cost between transitioned replacement heifers and organic from last third of gestation replacement heifers is currently $1,000
per head, that half of organic replacement heifers currently purchased are transitioned, and that the increased demand for organic replacement heifers raises their price by $500. Based on our analysis, AMS estimates that, under the proposed rule, small operations would collectively spend an additional $1,312,317 to $1,749,756 for heifers.
Large operations would collectively pay an additional $128,649 to $171,532 for heifers. Of the operations that purchase heifers, the average additional cost per operation in the 50 percent price increase scenario would be $4,926 to $6,569 for small operations and $9,247
to $12,330 for large operations.39 AMS
notes that this analysis assumed that there is no difference in the cost per head paid by large and small operations for purchases of replacement heifers and that these costs estimates do not include transfers.40 Table 7 summarizes the cost analysis using SBA criterion for small businesses i.e., producers with less than $1,000,000 in cash receipts.

TABLE 7COST OF ORGANIC REPLACEMENT HEIFERS BY SBA CRITERION FOR SMALL BUSINESSES
Small operations <$1,000,000

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Total cost all operations
Per operation purchasing replacement heifers 25% to 50% transitioned replacements
$1,312,317$1,749,756
$4,926$6,569

To understand the potential costs in context, we used the higher average cost estimate per operation from Table 7 for the purchase of organic replacement heifers i.e., $6,569 for small; $12,330
for large and compared it to the average gross cash farm income for farms with 200 head or fewer and for farms with more than 200 head using a revenue estimate from ARMS data that farms earn $2,855 per head. Of farms with 200
head or fewer and $158,003 in sales on average, the 11.3 percent of farms purchasing replacement heifers will have their costs increase 4.2 percent on average. Of large farms with more than 200 head and $1,683,366 in revenue, the 12.33 percent purchasing replacement
heifers will see costs increase by 0.7
percent.
It is important to note that these cost figures do not include the potential offsetting effect of transfers, or increased revenue from replacement heifer sales as organic replacement heifer prices increase. This revenue is recorded as a transfer in the benefit-cost analysis.
If implemented, the proposed rule would, as discussed in the benefits portion of RIA, ensure that consumer expectations are met and support the market for these organic products. AMS
believes that the long-term economic impact on producers of not implementing the proposal would be greater than the economic impact of a
39 Small operations making purchases buy 6.57
heifers and will pay $1,000 more for half those animals and $2,000 on the others. Large operations making purchases buy 12.33 heifers and will also
pay $1,000 more for half those animals and $2,000
on the others.
40 As with the Table 5 costs breakout by operation size, total costs in Table 7 $1.440 million and $1.921 million under the 25 and 50 percent
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Large operations > = $1,000,000
$128,649$171,532
$9,247$12,330

rule due to the need for greater consistency in applying the origin of livestock standard across the organic dairy sector.
AMS has not identified any relevant Federal rules that are currently in effect that duplicate, overlap, or conflict with the proposed rule. The proposed action would provide additional clarity on the origin of livestock requirements that are specific and limited to the USDA
organic regulations.
Erin Morris, Associate Administrator, Agricultural Marketing Service.
FR Doc. 202109978 Filed 51121; 8:45 am BILLING CODE P

transitioning scenarios roughly equal the Table 4
estimates of costs net of transfers $1.463 million and $1.950 million. Discrepancies are attributed to rounding errors.

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