Rule2022-06957
National Organic Program; Origin of Livestock
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
April 5, 2022
Effective
June 6, 2022
Issuing agencies
Agriculture DepartmentAgricultural Marketing Service
Abstract
The U.S. Department of Agriculture's (USDA) Agricultural Marketing Service (AMS) amends the origin of livestock requirements for dairy animals under the USDA organic regulations with this final rule. AMS is taking this action to increase uniformity in origin of livestock production practice for organic dairy animals, and reduce variance between the approaches taken by certifying agents. The policy choices in this rule align with practices that many certifiers and most organic operations already follow, and align with the public comments on the rule. This rule specifies that organic milk and milk products must be from animals that have been under continuous organic management from the last third of gestation onward, with an exception for newly certified organic livestock operations.
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 65 (Tuesday, April 5, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 65 (Tuesday, April 5, 2022)]
[Rules and Regulations]
[Pages 19740-19773]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-06957]
[[Page 19739]]
Vol. 87
Tuesday,
No. 65
April 5, 2022
Part II
Department of Agriculture
-----------------------------------------------------------------------
Agricultural Marketing Service
-----------------------------------------------------------------------
7 CFR Part 205
National Organic Program; Origin of Livestock; Final Rule
Federal Register / Vol. 87 , No. 65 / Tuesday, April 5, 2022 / Rules
and Regulations
[[Page 19740]]
-----------------------------------------------------------------------
DEPARTMENT OF AGRICULTURE
Agricultural Marketing Service
7 CFR Part 205
[Doc. No. AMS-NOP-11-0009; NOP-21-04]
RIN 0581-AD89
National Organic Program; Origin of Livestock
AGENCY: Agricultural Marketing Service, USDA.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: The U.S. Department of Agriculture's (USDA) Agricultural
Marketing Service (AMS) amends the origin of livestock requirements for
dairy animals under the USDA organic regulations with this final rule.
AMS is taking this action to increase uniformity in origin of livestock
production practice for organic dairy animals, and reduce variance
between the approaches taken by certifying agents. The policy choices
in this rule align with practices that many certifiers and most organic
operations already follow, and align with the public comments on the
rule. This rule specifies that organic milk and milk products must be
from animals that have been under continuous organic management from
the last third of gestation onward, with an exception for newly
certified organic livestock operations.
DATES:
Effective date: This rule is effective June 6, 2022.
Compliance date: Certified organic operations must comply with all
provisions of this final rule by April 5, 2023. For more information,
see the Compliance Date for These Regulations section of this document.
FOR FURTHER INFORMATION CONTACT: Erin Healy, Director, Standards
Division; Phone: (202) 720-3252, email: <a href="/cdn-cgi/l/email-protection#6500170c0b4b0d0004091c25101601044b020a13"><span class="__cf_email__" data-cfemail="4623342f28682e23272a3f063335222768212930">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Executive Summary
A. Purpose of Final Rule
This final rule clarifies requirements related to organic dairy
production under the USDA organic regulations, which dictate how and
when nonorganic dairy animals may be transitioned, or converted, to
organic production (7 CFR part 205). This action specifies that a
nonorganic dairy may transition to organic production on a one-time
basis, and once the transition is complete, the operation must not
transition additional nonorganic animals to organic production or
source transitioned animals. This action is intended to facilitate and
improve compliance with and enforcement of the USDA organic
regulations.
The rule takes into account current practices and stakeholder input
to ensure a policy option that minimizes disruptions, while protecting
the value of the organic label. This final rule will improve AMS's
ability to effectively administer the National Organic Program (NOP)
and improve AMS's oversight of the USDA-accredited certifying agents
that inspect and certify organic dairy operations. The final rule is
also intended to maintain consumer trust in the organic seal by
assuring consumers that organically produced products meet a consistent
and uniform standard--a stated purpose of the Organic Foods Production
Act of 1990 (OFPA) (7 U.S.C. 6501 et seq.).
AMS is making these changes, following consultation with the
National Organic Standards Board (NOSB) and following notice and public
comment, to provide additional details for the USDA organic regulations
governing the production of organic livestock products, and at the
direction of Congress (Further Consolidated Appropriations Act, 2020;
Pub. L. 116-94), and as authorized under OFPA (Sections 6509(e)(2) and
6509(g)).
B. Summary of Provisions
This final rule updates the origin of livestock regulations, first
published in December 2000 in the Federal Register (65 FR 80547), by
explicitly requiring that milk or milk products labeled, sold, or
represented as organic be from dairy animals organically managed from
the last third of gestation onward, with a one-time exception for newly
certified organic livestock operations to convert (or ``transition'')
nonorganic dairy animals to organic milk production. This exception
allows an eligible operation to transition nonorganic dairy animals to
organic milk production one time by managing animals organically for
12-months rather than from the last third of gestation. The transition
must occur over a single 12-month period and all transitioning animals
must end the transition at the same time.
After the transition to organic production is complete, an
operation is not allowed to transition additional nonorganic animals to
organic milk production, and the certified operation may not source
animals transitioned by other operations. After the transition, an
operation replacing culled dairy animals and/or expanding its number of
dairy animals must add dairy animals that have been under continuous
organic management from the last third of gestation.
In this final rule, AMS clarifies that breeder stock must be
managed organically during the period that breeder stock are nursing
their organic offspring, from the last third of gestation through the
end of the nursing period. Breeder stock that are not certified organic
may not be sold, labeled, or represented as organic. The final rule
reiterates that nonorganic breeder stock may be brought from a
nonorganic operation onto an organic operation at any time, but they
must be brought onto the organic operation no later than the last third
of gestation if their offspring are to be raised as organic livestock.
C. Regulatory Analysis (Costs and Impacts)
AMS is taking this action to set origin of livestock production
practice standards for organic dairy animals, and reduce variance
between the approaches taken by certifying agents. AMS updated the
analysis from the proposed rule (84 FR 52041) using the most recent
information about the dairy market, including the number of certified
organic operations and the number of organic dairy animals. Updating
the information with NASS 2019 data revises the estimated costs of the
final rule to $615,000-$1,845,000.
D. Compliance Date for These Regulations
AMS is establishing a compliance date for this final rule of April
5, 2023, or ten months after the effective date of this final rule.
This means that a certified operation may only add transitioned animals
to their operation up to the compliance date of April 5, 2023. Any
certified operation may source or sell transitioned animals in the
period prior to the compliance date, but certified operations may not
start new transitions that would not be completed by April 5, 2023.
Starting on the compliance date of April 5, 2023, all certified
operations (i.e., operations certified as of the compliance date) must
fully comply with the provisions of this final rule.
I. General Information
Does this action apply to me?
You may be affected by this action if you are engaged in the dairy
industry. Affected entities may include, but are not limited to:
<bullet> Individuals or business entities that are considering
owning or operating a new dairy farm and that plan to seek organic
certification for that farm;
[[Page 19741]]
<bullet> Dairy farms that are currently certified organic under the
USDA organic regulations;
<bullet> Organic farms engaged in raising heifers for sale to
certified organic operations;
<bullet> Nonorganic dairy farms that are considering converting
their dairy farm to certified organic production; and/or
<bullet> Certifying agents accredited under the USDA organic
regulations to certify organic livestock operations.
This listing is not intended to be exhaustive but rather provides a
guide for readers regarding entities likely to be affected by this
action. Other types of entities not listed in this section could also
be affected. To determine whether you or your business may be affected
by this action, you should carefully examine the regulatory text. If
you have questions regarding the applicability of this action to a
particular entity, consult the person listed under FOR FURTHER
INFORMATION CONTACT.
II. Background
AMS's National Organic Program (NOP) is authorized by the Organic
Foods Production Act of 1990 (OFPA) (7 U.S.C. 6501-6524). Through the
NOP, AMS establishes and oversees the implementation of national
standards for the production and handling of organically produced
agricultural products. Below, background is provided on the topics of
dairy transition and breeder stock, describe general dairy production
practices, and summarize the history of this rulemaking.
A. Dairy Transition
OFPA establishes that, in general, organic livestock must be
organically managed from the last third of gestation onward (7 U.S.C.
6509(b)). For dairy animals, OFPA requires a minimum period of one year
of organic management before milk from dairy animals can be sold as
organic (7 U.S.C. 6509(e)(2)). During the transition period, OFPA also
allows dairy farms to feed dairy animals crops and forage from land on
the dairy farm that is in its third year of organic management (Id.).
The USDA organic regulations regarding the origin of livestock (7
CFR 205.236) have required that all livestock products sold, labeled,
or represented as organic must be from livestock under continuous
organic management from the last third of gestation onward. For dairy
animals, the USDA organic regulations have also provided an exception
(Sec. 205.236(a)(2)) that allows for the transition of a dairy herd
into organic production if animals are under continuous organic
management for the one-year period prior to production of organic milk
or milk products. During this one-year period, dairy animals may
consume certified organic feeds and/or crops and forage from land that
is in the third year of organic management and included in the organic
system plan but has not yet been certified organic (Sec.
205.236(a)(2)(i)). Section 205.236(a)(2)(iii) has required that once an
``entire distinct herd'' has transitioned to organic production, all
dairy animals in that herd shall be organically managed from the last
third of gestation.
As USDA noted when promulgating the regulations that first
implemented the NOP, ``[t]he conversion provision . . . rewards
producers for raising their own replacement animals while still
allowing for the introduction of animals from off the farm that were
organically raised from the last third of gestation.'' 65 FR 80570
(Dec. 21, 2000). USDA explained that ``the conversion provision cannot
be used routinely to bring nonorganically raised animals into an
organic operation. It is a one-time opportunity for producers working
with a certifying agent to implement a conversion strategy for an
established, discrete dairy herd . . . .'' Id.
These provisions have established two different classes of organic
animals that operations and their certifiers track, because there are
implications in terms of the fate of the animal: Last third organic
animals may be eligible for organic slaughter (if also not treated with
synthetic parasiticides that appear on the National List \1\), while
transitioned animals (as well as last third animals that have received
parasiticides) are ineligible for organic slaughter.
---------------------------------------------------------------------------
\1\ 7 CFR 205.238(c) and 7 CFR part 205 Subpart G. <a href="https://www.ecfr.gov/current/title-7/subtitle-B/chapter-I/subchapter-M/part-205/subpart-G">https://www.ecfr.gov/current/title-7/subtitle-B/chapter-I/subchapter-M/part-205/subpart-G</a>.
---------------------------------------------------------------------------
The USDA organic regulations related to transition of dairy animals
have been inconsistently applied, however, in part because while they
have allowed for the transition of a nonorganic herd to organic milk
production after one year of organic management, the regulations did
not define an ``entire distinct herd.'' This has led to significant
inconsistencies in the regulatory interpretation by certifying agents
and farms. For example, some operations and certifying agents consider
an entire distinct herd to include all the animals on the farm. In
contrast, others have applied the rules differently, allowing smaller
groups to be considered multiple distinct herds. Some certifying agents
have allowed dairy farms to continually transition nonorganic dairy
animals into organic production as new ``distinct'' herds, while other
dairy operations have been allowed to use the transition exception only
once (i.e., when they initially converted their farm's entire
nonorganic ``herd'' to organic production). The inconsistent
interpretation has led to unevenness in the marketplace. This final
rule adopts the latter interpretation, and amends the regulations
regarding dairy animals to clarify their requirements. As USDA first
said more than twenty years ago, organic dairy operations may ``rais[e]
their own replacement animals'' or ``introduce[e] . . . animals from
off the farm that were organically raised from the last third of
gestation.'' 65 FR 80570. But they may not ``routinely . . . bring
nonorganically raised animals into an organic operation.'' Id. When
Congress amended 7 U.S.C. 6509(e)(2) in 2005, it did not disturb this
understanding.
In a 2006 rulemaking, USDA noted that some ``commenters wanted the
last third of gestation clause to apply to all dairy operations once
the operation is certified as organic, regardless of the number of
animals converted, or whether an entire, distinct herd is converted.''
71 FR 32804. USDA responded that those comments were beyond the scope
of the present rulemaking, but recognized that its regulations left
``two methods of replacement of dairy animals for organic dairy
operations and that this is a matter of concern in the organic
community.'' Id. USDA suggested that it would undertake further
rulemaking ``[t]o address the issue of dairy replacement animals for
all certified organic dairy operations.'' Id.
Differences in how certifying agents have interpreted the
regulations were detailed in a July 2013 audit report published by the
USDA Office of Inspector General (OIG).\2\ According to the OIG report,
three of the six certifying agents interviewed by OIG allowed producers
to continuously transition additional herds to organic milk production,
while the other three certifying agents did not permit this practice.
OIG recommended that a proposed rule be issued to clarify the standard
and ensure that all certifying agents consistently apply and enforce
the origin of livestock requirements. The National Organic Standards
Board (NOSB) has also issued several recommendations that AMS revise
the transition exception to clarify that each operation is entitled to
a one-time
[[Page 19742]]
transition per operation (see Development of Existing Standards below).
This final rule responds to the OIG's findings and the NOSB's
recommendations on this issue. It was also directed by Congress
(Further Consolidated Appropriations Act, 2020).
---------------------------------------------------------------------------
\2\ The July 2013 OIG audit report on organic milk operations
may be accessed at the following website: <a href="http://www.usda.gov/oig/webdocs/01601-0002-32.pdf">http://www.usda.gov/oig/webdocs/01601-0002-32.pdf</a>.
---------------------------------------------------------------------------
B. Breeder Stock
OFPA states that breeder stock may be purchased from any source if
such stock is not in the last third of gestation (7 U.S.C. 6509(b)).
The USDA organic regulations define breeder stock as female livestock
whose offspring may be incorporated into an organic operation at the
time of their birth (7 CFR 205.2). Nonorganic breeder stock may be used
to raise organic offspring if certain conditions are met. The
regulations specify that such breeder stock may be brought from a
nonorganic operation onto an organic operation at any time (7 CFR
205.236(a)(3)). If breeder stock are gestating and their offspring are
to be raised as organic, the regulations require that the breeder stock
be brought onto the facility and organically managed no later than the
last third of gestation (7 CFR 205.236(a)).
Stakeholders, through public comment to the NOSB and comments to
NOP, have expressed concern that some operations may bring breeder
stock onto an organic operation, manage them organically for the last
third of gestation so that the breeder stock can produce and nurse the
organic offspring, and then return that breeder stock to nonorganic
management. Some stakeholders, including the NOSB, have suggested that
such a practice does not align with a regulatory provision that
prohibits organic livestock removed from organic operations and
subsequently managed on nonorganic operations to be sold, labeled, or
represented as organically produced (7 CFR 205.236(b)).\3\ To clarify
these potentially conflicting regulations, this final rule addresses
the use and management of breeder stock on organic operations.
---------------------------------------------------------------------------
\3\ National Organic Standards Board April 2003 Recommendation
on Breeder Stock: Clarification of Rule. Available online at:
<a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations">https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations</a>.
---------------------------------------------------------------------------
C. Overview of Organic Dairy Production
This section provides a high-level overview of heifer (i.e., young
female cows) raising practices. It also highlights the differences
between organic and nonorganic practices for raising replacement dairy
heifers (i.e., the animals brought onto a farm to replace the animals
that die or that are removed from the farm for other reasons).
Current dairy production and husbandry practices provide important
context for this rulemaking. The practices described below are specific
to raising dairy heifers but may be applied similarly to other species.
However, the timing of events may differ depending on the animal.
(e.g., a dairy goat may begin its first lactation at one year of age
while a cow begins its first lactation at nearly two years of age).
Nonorganic Heifer Development
When a heifer calf (i.e., a young female cow) is born on a dairy
farm, the producer ensures that the calf receives colostrum, either
from a bottle or by nursing her female parent (``dam'' or ``mother'').
The heifer calf will often be separated from the dam and placed in
single, pair, or group housing. Some dairy producers raise their own
heifers from birth; others may contract with heifer growers to raise
replacement heifers during different stages of their lives until they
produce milk. Newborn calves are raised on a diet of milk or milk
replacer, grains, and roughages. Once the calves reach a certain
weight, they are weaned from milk to water and continue to eat grains
and roughages.
After weaning, the heifers are developed to grow at a moderate pace
until they are ready to be bred. During this time, heifers may be fed
pasture only; graze and be fed a supplemental feed ration; or be fed
only a feed ration (depending on the operation's grazing season). Once
the heifers weigh about 800 pounds (12-15 months old), they are bred,
gestate for 9 months, and calve around 2 years of age. After calving,
they begin producing milk (and are then referred to as cows).
Organic Heifer Development
Organic producers follow similar timelines as nonorganic producers
but may use different practices in the feeding, health care, and
breeding of heifers. These differing practices may affect production
costs in each stage of organic heifer development.
Organic producers must provide a feed ration comprised of certified
organic feeds. Currently, there is very little certified organic milk
replacer produced in the United States. As a result, organically raised
dairy calves primarily rely on feeding certified organic milk. This
makes the practice of sending newborn calves to heifer growers less
feasible for organic producers, as heifer growers may not have access
to certified organic milk. Certified organic animals (and animals
undergoing a one-time transition to organic) must be fed an organic
feed ration. Additionally, organic regulations require that all
ruminants greater than 6 months of age receive 30 percent of their dry
matter intake from pasture during the grazing season. Nonorganic dairy
heifers do not have a pasture requirement.
Organic producers must also follow certain health care practices.
For example, organic producers may not use antibiotics to prevent
disease. Instead, organic producers must prevent the animals from
getting sick using organically approved methods such as supportive
therapy and vaccination programs. In the event an animal becomes sick,
organic producers are required to use medication to restore the animal
to health, even if the treatment will cause the animal to lose its
organic status. Once an animal loses its organic status, the animal
(and its products) cannot be represented as organic. This final rule
clarifies that nonorganic animals--including animals that have lost
organic status due to a veterinary treatment--may only be transitioned
to organic by eligible operations as part of that operation's one-time
transition.
Nonorganic breeding practices are less expensive than organic
breeding practices. Nonorganic producers may use hormonal products to
both initiate estrus and synchronize estrus among heifers to aid in
conception, essentially promoting an earlier lactation. Organic
producers may not use hormonal methods to synchronize estrus.
These differences in production practices cause many certifying
agents to prohibit continual transition, and as such, many operations
already comply with the final rule. The 2013 OIG audit of the National
Organic Program and organic milk operations (Audit Report 01601-0002-
32) found that half of the six certifiers interviewed allowed
continuous transition at the time, while the other three did not. Prior
to this final rule, dairy farms and heifer raising operations that were
permitted by their certifying agent to continually transition dairy
animals could reduce production costs by not managing their heifer
calves under the USDA organic regulations for the first year of life.
Alternatively, they could source less expensive year-old nonorganic
heifers on a continual basis. The pre-weaning phase of life is the time
in which heifer calf mortality is the highest and the diet is the most
expensive on a per-calorie basis. Nonorganic practices reduce mortality
and expenses during this pre-weaning phase by feeding heifers milk
replacer and nonorganic feeds, and by using antibiotics to maintain
health. By the time the dairy heifer reaches one year of
[[Page 19743]]
age, most health threats have passed and the animal is consuming a less
expensive diet.
D. Development of Existing Standards
OFPA required the USDA to establish the NOSB to advise the USDA on
the implementation of OFPA (7 U.S.C. 6518). The NOSB held its first
formal meetings in 1992. Between 1994 and 2006, the NOSB made six
recommendations regarding origin of dairy animals, including several
recommendations on the management of breeder stock.\4\ Between 1997 and
2000, AMS issued two proposed rules (62 FR 65850; 65 FR 13511) and a
final rule (65 FR 80547) regarding national standards for production
and handling of organic products, including livestock and their
products. AMS also issued a proposed rule and final rule in 2006
implementing congressional amendments to OFPA regarding feed for
transitioning dairy animals (71 FR 24820; 71 FR 32803). The NOSB, as
well as the public, commented on these rulemakings with regard to the
origin of livestock and the exception for transition. Key points from
these actions that led to the development of the existing standards on
origin of livestock are summarized below.
---------------------------------------------------------------------------
\4\ A complete listing of related documents and NOSB
recommendations is found in Sections III and IV below.
---------------------------------------------------------------------------
(1) In June 1994, the NOSB recommended a series of provisions to
address the source of livestock on organic farms. Within this
recommendation, the NOSB stated that dairy stock should be fed
certified organic feeds and raised under organic management practices
for no less than 12 months prior to the sale of their milk as
organic.\5\
---------------------------------------------------------------------------
\5\ NOSB Final Recommendation, June 2, 1994. Available online
at: <a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/meetings">https://www.ams.usda.gov/rules-regulations/organic/nosb/meetings</a>.
---------------------------------------------------------------------------
(2) On December 16, 1997, AMS responded to the June 1994 NOSB
recommendation through publication of a proposed rule (62 FR 65850).
The language contained in that proposed rule echoed the NOSB's 1994
recommendation. The proposal would have required that dairy animals
must be on a certified organic facility beginning no later than 12
months prior to the production of milk or milk products sold, labeled,
or represented as organic. The 1997 proposed rule also proposed that
all feed provided to organic dairy livestock consist of organically
produced and handled agricultural products, including pasture and
forage. However, the proposed rule included a provision to allow
nonorganic feed up to a maximum of 20 percent of the animal's diet. The
20-percent level was roughly representative of the nutrients provided
from supplemental grain feeding, in addition to nutrients provided by
pasture and forage. The proposed language also contained a provision
that, if necessary, a herd of dairy livestock converting to organic
management for the first time could be provided with nonorganic feed
until 90 days prior to the production of organic milk or milk products.
This proposed rule was never finalized.\6\
---------------------------------------------------------------------------
\6\ Due to the volume and content of public comments submitted
in response to the 1997 proposed rule, AMS withdrew the proposal and
issued a second proposed rule prior to the final rule that
established the National Organic Program (NOP) (published December
21, 2000).
---------------------------------------------------------------------------
(3) In March 1998, the NOSB provided a second recommendation
reaffirming its 1994 recommendation on the source of livestock.\7\ The
March 1998 NOSB recommendation also recommended that livestock
comprising part of a mixed crop/livestock operation should qualify to
be certified organic at the end of the transition period.
---------------------------------------------------------------------------
\7\ NOSB Committee Report and Adopted Recommendations, 16 March
1998. Available online at: <a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/meetings">https://www.ams.usda.gov/rules-regulations/organic/nosb/meetings</a>.
---------------------------------------------------------------------------
(4) On March 13, 2000, AMS published a proposed rule (65 FR 13511)
that would establish the USDA organic regulations. Within this proposed
rule, AMS responded to the NOSB's March 1998 recommendation on the
source of livestock. AMS proposed to require that livestock be under
continuous organic management beginning no later than one year prior to
the production of organic milk or milk products. Unlike AMS's 1997
proposal, the 2000 proposed rule did not include a provision for the
allowance of nonorganic feed during the 12-month transition period.
(5) On June 12, 2000, the NOSB commented on the second proposed
rule with respect to the origin of dairy livestock. The NOSB stated
that livestock should be under organic management for one full year
prior to the sale of organic milk with an exception for conversion of
an entire, distinct herd into organic production. The NOSB laid out the
following three conditions for conversion of a herd into organic
production:
<bullet> For the first 9 months of the final 12-month dairy herd
transition period, animals must be fed at least 80 percent feed that is
either organic or self-raised transitional feed. The remaining 20
percent could be nonorganic during those 9 months.
<bullet> For the final 3 months, animals must be fed 100 percent
organic feed.
<bullet> Once a dairy operation has been converted to organic
production, all dairy animals shall be under organic management from
the last third of gestation, except that transitional feed raised on
the farm may be fed to young stock up to 12 months prior to milk
production.
(6) On December 21, 2000, AMS published a final rule establishing
the USDA organic regulations (65 FR 80547). Through this action, AMS
finalized the origin of livestock provision, including a requirement
that organic milk be produced from animals under organic management
beginning no later than one year prior to the production of milk or
milk products sold, labeled, or represented as organic. The rule
further incorporated the exceptions recommended by the NOSB by allowing
80 percent organic feed and 20 percent nonorganic feed (i.e., the ``80/
20'' rule) for transitioned animals. AMS did not include NOSB's
recommendation allowing young stock to be fed transitional feeds. This
rule went into effect on February 20, 2001, and was fully implemented
on October 21, 2002.
(7) In October 2002, the NOSB recommended that all replacement and
expansion dairy animals be raised as organic from the last third of
gestation onward. The NOSB believed that this would ensure consistency
with the current regulations at Sec. 205.236(a)(2)(iii). Its
recommendation also included a provision requiring that breeder stock
remain under organic management indefinitely after their introduction
onto an organic farm; that is to say, the recommendation was to
prohibit breeder stock from rotating in and out of organic management.
(8) In May 2003, the NOSB recommended that following a transition,
all dairy livestock, including replacement stock, remain under organic
management from the last third of gestation onward.\8\ Concurrently,
the NOSB made a separate recommendation regarding breeder stock.\9\ It
recommended a requirement that operations continuously manage all
breeder stock as organic if they were brought onto an organic farm to
produce organic offspring. The NOSB further
[[Page 19744]]
advocated that the NOP issue guidance in the form of questions and
answers to clarify the management of breeder stock to the industry. The
NOSB reiterated its recommendations in October 2004.\10\
---------------------------------------------------------------------------
\8\ National Organic Standards Board May 2003 Recommendation on
Origin of Livestock: Recommendation for Rule Change (document dated
April 2003). Available online at: <a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations">https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations</a>.
\9\ National Organic Standards Board May 2003 Recommendation on
Breeder Stock: Recommendation for Clarification of Rule (document
dated April 2003). Available online at: <a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations">https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations</a>.
\10\ National Organic Standards Board (October 2004) Directive
for Origin of Dairy Livestock. Available online at: <a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations">https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations</a>.
---------------------------------------------------------------------------
(9) In October 2003, a legal challenge was filed against USDA
stating that, among other things, OFPA required organic dairy animals
be fed 100 percent organic feeds during the 12-month transition, and
thus, the 80/20 rule for the transition of dairy animals was in
violation of the statute.\11\
---------------------------------------------------------------------------
\11\ Harvey v. Veneman, 297 F. Supp. 2d 334 (D. Maine 2004).
---------------------------------------------------------------------------
(10) On January 26, 2005, the U.S. Court of Appeals for the First
Circuit issued a decision in the case.\12\ The court upheld the USDA
organic regulations in general, but remanded the case to the lower
court, for, among other things, the entry of a declaratory judgment
with respect to the 80/20 dairy transition allowance, then codified in
Sec. 205.236(a)(2)(i) of the regulations. The lower court found the
80/20 dairy transition provisions at Sec. 205.236(a)(2)(i) to be
contrary to OFPA and in excess of the Secretary's rulemaking
authority.\13\
---------------------------------------------------------------------------
\12\ Harvey v. Veneman, 396 F. 3d 28 (1st Cir. 2005).
\13\ Harvey v. Johanns. Civil No. 02-216-P-H. Consent Final
Judgment and Order, 9 June 2005.
---------------------------------------------------------------------------
(11) On November 10, 2005, Congress amended OFPA to allow a special
provision for transitioning dairy livestock to organic production (7
U.S.C. 6509(e)(2)(B)). This amendment provided a new provision to allow
crops and forage from land included in the organic system plan of a
farm that was in the third year of organic management to be consumed by
the dairy animals on the farm during the 12-month period immediately
prior to the sale of organic milk and milk products.
(12) On April 27, 2006, AMS published a proposed rule (71 FR 24820)
entitled ``Revisions to Livestock Standards Based on Court Order'' to
address the November 2005 amendments to OFPA. AMS received nearly
12,400 comments on the issue of dairy animal replacement during the
comment period for this proposed rule. Additionally, in response to the
April 13, 2006, advanced notice of proposed rulemaking on access to
pasture (71 FR 19131), AMS received over 325 comments on the issue of
dairy animal replacement. Neither of these actions intended to address
the dairy replacement or transition issue as an objective. Accordingly,
the comments were not a part of subsequent rulemaking for either
action, as they were beyond the scope of these rules. They are,
however, acknowledged and discussed in this final rule.
(13) On May 12, 2006, the NOSB provided a comment on the April 2006
proposed rule (71 FR 24820).\14\ In its comment, the NOSB offered
modifications to its May 2003 dairy replacement recommendation \15\ for
the regulatory text to read: ``Once a dairy operation has been
converted to organic production, all dairy animals, including all young
stock whether born on or brought onto the operation, shall be under
organic management from the last third of the mother's gestation.'' The
modification was intended to clarify that any animal brought onto an
organic operation, after conversion, should be under organic management
from the last third of gestation (i.e., purchase of animals
transitioned by other operations should not be permitted). The revised
text also intended to clarify that an operation (as opposed to herd) is
entitled to the one-time opportunity to convert to organic production.
---------------------------------------------------------------------------
\14\ NOSB's comment on the proposed rule is available from the
NOP by request.
\15\ National Organic Standards Board May 2003 Recommendation on
Origin of Livestock: Recommendation for Rule Change (document dated
April 2003). Available online at: <a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations">https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations</a>.
---------------------------------------------------------------------------
(14) On June 7, 2006, AMS published a final rule entitled
``Revisions to Livestock Standards Based on Court Order'' (71 FR 32803)
to implement the November 2005 statutory change. The amendments
reflected the new OFPA allowance permitting transitioning dairy animals
to be fed feedstuffs from transitioning lands in the last year of the
3-year transition period (7 CFR 205.236(a)(2)(i)), as well as setting a
termination date of June 9, 2007, for the existing 80/20 feed
conversion rule (7 CFR 205.236(a)(2)(ii)). In the preamble to the 2006
final rule, AMS noted that additional clarity could be provided
regarding the transition of dairy animals into organic production.
(15) In October 2006, NOP published guidelines meant to clarify the
existing origin of livestock rule.\16\ The guidelines allowed organic
milk operations that were certified organic prior to October 21, 2002,
or that transitioned their cattle by feeding them 100 percent organic
feed during conversion, to acquire additional conventional (or
``nonorganic'') cattle and transition them to an organic status. The
guidelines prohibited organic milk operations that transitioned their
cattle using the 80/20 exemption from transitioning additional cattle.
This guidance document was archived by AMS on January 31, 2011, in
anticipation of rulemaking to clarify the origin of livestock rule.
---------------------------------------------------------------------------
\16\ NOP 5003 Dairy Animal Acquisition under the NOP Regulations
(dated October 3, 2006). Available from NOP by request.
---------------------------------------------------------------------------
(16) On April 28, 2015, AMS published a proposed rule titled
``Origin of Livestock'' (80 FR 23455) to propose changes to the
exception allowing nonorganic dairy animals to transition to organic
milk production after one year of organic management. This action
proposed that each producer (e.g., individual or business entity) would
be allowed to transition nonorganic dairy animals to organic milk
production only one time. After the transition is completed, a producer
could transition dairy animals in the future only if the producer,
through its certifying agent, requests an exemption due to a natural
disaster or damage caused by drought, wind, flood, excessive moisture,
hail, tornado, earthquake, fire, or other business interruption, in
accordance with 7 CFR 205.290. The comment period for the proposed rule
was opened on April 28, 2015, for 60 days, during which time AMS
received 1,371 public comments.
(17) On October 1, 2019, AMS reopened the comment period on the
April 28, 2015, proposed rule (84 FR 52041). The comment period was
reopened for 60 days during which time AMS received 746 public
comments.
(18) On December 20, 2019, Congress instructed AMS to finalize
rulemaking within 180 days in the Further Consolidated Appropriations
Act, 2020 (Pub. L. 116-94, div. B, title VII, section 756, Dec. 20,
2019, 133 Stat. 2654), stating ``the Secretary of Agriculture shall
issue a final rule based on the proposed rule entitled `National
Organic Program; Origin of Livestock,' . . . Provided, That the final
rule shall incorporate public comments submitted in response to the
proposed rule.''
(19) On May 12, 2021, AMS reopened the comment period (86 FR 25961)
on the 2015 proposed rule. AMS requested comments on specific topics,
including whether AMS should prohibit the movement of transitioned
cows, and whether AMS should use the term ``operation'' or ``producer''
to describe the regulated entity. The 2021 comment period was reopened
for 60 days, during which time AMS received 486 public comments.
III. Overview of Comments
This section provides a summary of the comments AMS received on
issues related to this final rule. First, comments received on this
topic prior to
[[Page 19745]]
2015 are discussed, as they informed the development of the 2015
proposed rule and this final rule. AMS then summarizes comments
received since the publication of the 2015 proposed rule over the
course of three comment periods in 2015, 2019, and 2021. Finally, AMS
responds to specific comments in the description of this rule and in
the Regulatory Impact Analysis.
A. Discussion of Comments Received Prior to 2015
In general, the approximately 12,725 combined comments received on
the April 2006 proposed rule addressing the court order and the April
2006 advanced notice of proposed rulemaking on access to pasture
requested greater clarity on the parameters for transitioning dairy
animals into organic production and called for elimination of the
``two-track'' system. The ``two-track'' system refers to an April 2003
NOP statement that once an entire, distinct herd transitioned using the
80/20 provision (20 percent nonorganic feed in the 12 months before
milking), all offspring then had to be managed organically and no
transitioned replacements could be purchased.\17\ The NOP also stated
that, for those producers that did not use the 80/20 provision, the
dairy animals only needed to be under continuous organic management
starting no later than 12 months prior to production (i.e., producers
could continue to transition animals into organic over time).
---------------------------------------------------------------------------
\17\ Summarized in the National Organic Standards Board
Recommendation on Origin of Livestock: Recommendation for Rule
Change (document dated April 29, 2003). Available online at: <a href="https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations">https://www.ams.usda.gov/rules-regulations/organic/nosb/recommendations</a>.
---------------------------------------------------------------------------
The majority of commenters stated that the ``two-track'' system
could be addressed by conveying that, once a dairy operation is
certified organic, regardless of how that operation transitioned into
organic, all new dairy animals added to that operation should be
managed organically from the last third of gestation. Commenters stated
that this principle should apply to those animals born on the farm and
those purchased as replacement and expansion animals to increase herd
size.
Commenters stated that allowing organic dairy operations to add
only animals who have been managed organically since the last third of
gestation supports consumer confidence in the organic milk sector. They
reiterated that consumers expect that organic milk is produced without
the use of excluded methods and substances prohibited under the
regulations (i.e., hormones, antibiotics, and certain animal
medications), and believe that greater clarity on how animals can
transition into organic production is needed. Some commenters stressed
that organic dairy products were keystone products for consumer
confidence and a major stepping-stone to additional organic purchases.
Commenters stated that continued transition of nonorganic animals
increases the supply of animals able to produce organic milk, depresses
the value of organic heifers, and limits the incentives to produce
organic replacement animals. They also stated that the allowance to
transition a large number of animals, rather than purchasing or raising
animals as organic from last third of gestation, results in surplus
organic heifer calves being sold into the conventional market. Some
commenters stated that the practice of allowing some operations to
transition nonorganic animals on a regular basis encouraged
transitional heifer development farms (an operation that raises heifers
before they reach production age). They stated that it is easier and
less expensive to purchase transitioned animals from heifer development
farms than it is to raise animals that are organic from birth.
Commenters estimated that raising organic dairy animals is twice as
expensive as raising nonorganic dairy animals during their first year
of life. They contended that producers who sell organic calves and
replace them with transitioned nonorganically raised heifers have an
economic advantage over those who raise animals organically from birth,
due to the lower cost of nonorganic feed and nonorganic management.
Commenters believed that for the organic heifer market to develop, and
for there to be more organic stock available at an appropriate market
value, greater clarity is needed in the regulations to convey that
organic heifers are required in every case, except for the one-time
initial transition of a dairy operation.
Commenters stated that at least nine U.S.-based certifying agents
were requiring the dairy operations they certified (approximately 1,100
certified and 150 transitioning operations) to manage all replacement
dairy animals organically from the last third of gestation. This
accounted for roughly 50 percent of the organic dairy operations at
that time. Other certifying agents were allowing the other
approximately 50 percent of dairy operations to transition nonorganic
animals to organic on a continual basis. Commenters stressed that a
main purpose of OFPA is consumer assurance that organically produced
products meet a consistent standard and that the current origin of
livestock standard needs further specificity to meet that purpose.
B. Discussion of Comments Received on 2015 Proposed Rule
AMS received 1,371 comments during the first comment period for the
2015 proposed rule on Origin of Livestock (April 28, 2015, to July 27,
2015). Commenters included private citizens and consumers, producers,
consumer groups, organic certifying agents, producer groups, trade
organizations, milk handlers, and foreign and state governments. The
majority of comments (1,305 comments) were submitted by private
citizens and consumers. AMS identified approximately 1,110 form letter
submissions out of the 1,371 submissions. During the second comment
period (October 1, 2019 to December 2, 2019), AMS received 746
comments, which included 198 comments identified as form letters.
During the third comment period (May 12, 2021 to July 12, 2021), AMS
received 486 comments, which included 374 comments identified as form
letters.
A general summary of comments follows. Detailed discussion of
specific comments follows in the description of the final rule. All
comments on the 2015 proposed rule can be accessed at <a href="https://www.regulations.gov">https://www.regulations.gov</a> via Docket ID AMS-NOP-11-0009.
Of the comments received in 2015, most commenters supported the
proposed rule because they felt the proposed regulatory text was
intended to close loopholes that allowed operations to continuously
bring nonorganic animals into organic milk production. Comments that
expressed general support for the rule included private citizens and
consumers; dairy farmers; certifying agents; producer groups; consumer
groups; a trade organization; handlers and academics/specialists.
Other comments received in 2015 expressed general opposition to the
proposed rule. These commenters were mostly concerned that the proposed
rule would, for example: Weaken organic standards by creating
loopholes, make organic milk or food less healthy, or favor large
corporations and ``factory'' farms over small farms and consumers. Some
commenters were not aware USDA regulations allow for transitioning
nonorganic animals to organic production and were opposed to this
practice altogether. A commenter who supported continuous transition
questioned whether AMS had the authority to restrict the origin of
livestock as proposed. AMS responds to these comments below.
[[Page 19746]]
In 2019, AMS received comments in support of the rule, as well as a
few comments in opposition to the proposed rule. These commenters
outlined arguments similar to those submitted in 2015, and specifically
emphasized that changing the rule to allow only one transition to
organic per producer would be restrictive and beyond the scope of AMS's
legal authority, among other concerns.
In 2021, AMS reopened the proposed rule's comment period to seek
comment on several specific topics, including whether AMS should
prohibit the movement of transitioned dairy animals in organic dairy
production as part of the final rule, and whether AMS should regulate
``producers'' or ``operations.'' Commenters urged AMS to finalize the
rule without further delay, believing it would ensure dairy farms
operate on a level playing field and that animals are consistently
raised using organic practices. Commenters also responded to AMS's
specific requests, and those are discussed by topic below. A comment
asserted that USDA did not have the statutory authority to prohibit
certified operations that have completed their one-time transition from
acquiring transitioned animals for organic production.
IV. Overview of Amendments and Responses to Comments
The requirements of the final rule are discussed below. For each
section of the final rule, we describe comments that AMS received and
revisions from the proposed to final rule. AMS then discusses the
comments we received but did not incorporate into the final rule.
Comments received on the costs and benefits of the rule are discussed
in the Regulatory Impact Analysis. The final regulatory text is
available, in its entirety, at the bottom of this document.
This final rule clarifies a regulation that has been in effect for
twenty years. AMS considers the requirements for organic livestock in 7
U.S.C. 6509(b), (c), and (d) to be applicable to all organic livestock.
Section 6509(e)(2) requires organic management of dairy animals ``for
not less than the 12-month period immediately prior'' to the sale of
organic milk or milk products. AMS has interpreted this provision to be
the minimum 12-month period of organic management and that the
Secretary may establish a longer period for dairy operations. AMS had
determined that the appropriate period under which dairy animals must
be under organic management is from last third of gestation except
during the one-time transition when a new organic dairy operation is
being certified or when a nonorganic dairy operation is transitioning
to organic production. This final rule elaborates on the original 7 CFR
205.236(a)(2)(iii), under which organic dairy operations may ``rais[e]
their own replacement animals'' or ``introduce[e] . . . animals from
off the farm that were organically raised from the last third of
gestation,'' but may not ``routinely . . . bring nonorganically raised
animals into an organic operation.'' 65 FR 80570. AMS allowed the
minimum period of 12 months for new operation or transitioning
operations to assist new entrants into the organic market as a one-time
event.
In 2005, Congress amended section 6509(e)(2) to add subsection (B).
It left undisturbed subsection (A), which USDA had implemented in 7 CFR
205.236(a)(2)(iii). Additionally, in the further Consolidated
Appropriations Act of 2020, Congress instructed the Secretary to
``issue a final rule based on the proposed rule entitled `National
Organic Program; Origin of Livestock,' published in the Federal
Register on April 28, 2015 (80 FR 23455): Provided, That the final rule
shall incorporate public comments submitted in response to the proposed
rule.'' 7 U.S.C. 6509 note. Having incorporated the public comments on
the proposed rule and considered the need for consistency between
certifying agents, the need to consider the expectations of consumers
and organic producers, the need to be able to implement and enforce the
rule effectively, and the statutory provisions included in OFPA, the
Secretary now issues that final rule.
The proposed rule in 2015 stated that it would not prohibit the
movement of transitioned animals, a practice in which some operations
are currently engaged. In 2021, AMS reopened the comment period to seek
comment on whether the final rule should do so. With this final rule,
AMS is limiting the movement of transitioned animals. AMS views the
different parts of this final rule as working together: The one-time
transition allowance at the operation level will more effectively work
in the real world if we also limit the movement of transitioned
animals. The second part of the rule will facilitate the first part of
the rule.
A. Definitions (Sec. 205.2)
This section of the final rule defines terms that appear in the
final rule and/or existing USDA organic regulations. The final rule
adds three terms to organic regulations. ``Organic management'' is
defined as: ``management of a production or handling operation in
compliance with all applicable provisions under this part.'' The term
``third-year transitional crop,'' is defined as, ``crops and forage
from land included in the organic system plan of a producer's operation
that is not certified organic but is in the third year of organic
management and is eligible for organic certification in one year or
less.'' Finally, the term ``transitioned animal'' is defined as, ``A
dairy animal converted to organic milk production in accordance with
Sec. 205.236(a)(2) that has not been under continuous organic
management from the last third of gestation; offspring born to a
transitioned animal that, during its last third of gestation, consumes
third-year transitional crops; and offspring born during the one-time
transition exception that themselves consume third-year transitional
crops.'' Below we describe the final rule and respond to comments
received on the proposed definitions.
i. Definitions--Comments and Revisions
This section (Sec. 205.2) differs from the 2015 proposed rule as
follows:
``Dairy farm'': AMS received many comments on AMS's proposed
definition of a dairy farm. That proposal would have defined a dairy
farm as, ``A premises with a milking parlor where at least one
lactating animal is milked.'' Commenters were concerned that the
proposed definition of ``dairy farm'' required an operation to milk
only one animal to meet the definition of a dairy farm. Since any new
dairy farm could transition animals on a one-time basis, some
commenters were concerned that a producer would continuously create new
dairy farms for the purpose of producing transitioned animals,
defeating the purpose of the rule. Public comments argued this
interpretation would be relatively easy to make, because the dairy farm
definition requires that only one animal be milked. These transitioned
animals would then presumably be sold to other organic dairies, thereby
allowing operations to continuously add transitioned animals to their
operations and failing to establish consistency across operations.
These commenters suggested that AMS modify the definition of a
``dairy farm'' to close the potential loophole by requiring that a
dairy farm be a functioning `commercial dairy' that is inspected and
permitted by the state in which it operates, has a relationship with a
licensed milk handler, and has operated for no less than 180 days.
Other comments were concerned that legitimate dairies would be excluded
by our proposed definition, as AMS defined a dairy farm as a premise
with a milking parlor. They noted that dairy farms do not always have a
milking
[[Page 19747]]
parlor, for example, when dairies are starting transition with non-
milking animals (e.g., heifers). Another commenter pointed out that
some dairies use portable or mobile equipment for collecting milk and
that it was unclear if these operations would be considered dairy farms
under the rule. Another commenter stated that a ``dairy farm''
definition was not necessary and recommended that AMS delete the
definition in the final rule.
AMS has not included a definition for ``dairy farm'' in the final
rule. AMS concluded that the proposed term would not have included
certain legitimate dairy operations (i.e., dairy operations that do not
have a milking parlor) and would have included operations that should
not be considered dairy operations for the purposes of the rule (i.e.,
non-commercial dairy operations).
The final regulatory text does not include this term, as AMS
determined it is not necessary and is an ordinary term that does not
require definition. The proposed rule articulated the definition of
``dairy farm'' as a way to establish the eligibility requirements to
transition animals. AMS concluded an alternative approach was preferred
in the final rule to limit continual transition by organic operations,
as suggested by commenters. This decision was a logical outgrowth of
the proposed rule, based on the rule's articulated purpose. In the
final rule, the definition of a dairy farm is not necessary to
implement the final rule or achieve our regulatory objective. For
additional discussion, see the section on Dairy Transition (Sec.
205.236(a)(2)) below.
``Organic management'': In the proposed rule, AMS defined organic
management as, ``Management of a production or handling operation in
compliance with all applicable production and handling provisions under
this part.'' AMS is revising the proposed definition of ``organic
management'' in this final rule to simplify the wording and improve
readability. The change is not intended to alter the meaning of the
term. The final rule defines organic management more simply as,
``Management of a production or handling operation in compliance with
all applicable provisions under this part.'' This does not broaden, nor
does it intend to broaden the rule, as the only applicable provisions
are the production and handling provisions.
``Third-year transitional crop'': AMS received a comment that AMS's
proposed definition for ``third-year transitional crop'' referred only
to prohibited materials as the determining factor for evaluating
whether crops produced on the land could be considered transitional.
The commenter noted ``there is more to land transition than not
applying prohibited materials.''
AMS agrees that organic land management includes a range of
practices and requirements, only one of which is the absence of
prohibited materials. AMS has revised the definition to clarify that
third-year transitional crops are crops and forage harvested from land
that is in its third year of organic management and thus is eligible
for organic certification in one year or less.
``Transitional crop'': AMS received comments that the definition of
``transitional crop'' was unnecessary, as neither the current
regulations nor the proposed rule refer to ``transitional crop'' and
this term would not be needed to enforce the regulations. The commenter
argued that land is transitioning for three years and that it could be
considered ``transitional'' at any time during the three-year period,
including the time during the first year of transition.
AMS agrees that a definition for ``transitional crop'' is
unnecessary, and we have removed the definition from the final rule.
The term is not used in the regulations outside of the term ``third-
year transitional crop,'' and that term is separately defined in the
final rule. Furthermore, AMS does not establish requirements for
certification of transitional crops and does not intend to do so
through this rulemaking.
``Transitioned animal'': AMS received a comment on the definition
of a transitioned animal. This comment recommended removing the
language ``sold, labeled, or represented as organic slaughter stock or
for the purpose of organic fiber'' from the definition of a
transitioned animal and incorporating it into Sec. 205.236(a)(2)(vii).
AMS revised this definition to remove language that transitioned
animals cannot be sold, labeled, or represented as organic slaughter
stock or for the purpose of organic fiber. AMS is removing this
language, which was a requirement within the definition. The final rule
clearly states transitioned animals must not be used for organic
livestock products other than organic milk and milk products (Sec.
205.236(a)(2)(vii)). Additionally, AMS added language to the definition
to reiterate that transitioned animals are animals that have not been
under continuous organic management from the last third of gestation,
and we revised the spelling of ``borne'' to ``born''.
ii. Definitions--Changes Requested But Not Made
``Transitioned animal'': A commenter was opposed to AMS's inclusion
of ``offspring'' in this definition. It argued that the OFPA provision
that allows transitioning animals to be fed third-year transitional
crops ``applies to the animals of the farm that are being transitioned.
It does not apply to offspring born to the transitioning animals.'' AMS
disagrees that OFPA limits use of third-year transitional crops to any
specific class, or age, of livestock during the transition.
AMS also received comments requesting we include fiber-bearing
animals in the definition of a transitioned animal to allow nonorganic
fiber animals to transition to organic. AMS has not adopted this
suggestion, as OFPA does not include an allowance for fiber animals to
transition. For a discussion of this topic, please see the section
below titled ``J. Other Amendments Considered.''
``Person'' and ``Producer'': AMS did not propose to change the
definition of ``person'' or ``producer'' in the proposed rule, but
these two terms are defined in the current regulations at Sec. 205.2,
and AMS received comments about how those definitions could affect the
implementation of our rule. Comments primarily expressed concern that a
producer could continuously transition by repeatedly creating new or
separate legal entities or that eligibility requirements would be
difficult to verify. Another comment stated that an operation may have
numerous individuals conducting business on the premises, and the
proposed rule language does not explicitly define which of these
individuals should be considered the producer for purposes of the one-
time transition allowance.
AMS has not revised the definitions for either term, as the final
rule does not rely on these terms to establish who may transition
animals. For a discussion of changes made by AMS to address comments
about who is eligible to transition, see the discussion below on Dairy
Transition.
B. Dairy Transition (Sec. 205.236(a)(2))
This section of the final rule specifies who is eligible to
transition nonorganic animals to organic production and the
requirements and conditions of the transition period. The section also
prohibits organic livestock operations from sourcing transitioned
animals, except in specific and limited cases where the Administrator
may grant a variance. Table 1 outlines the restrictions by dairy animal
type.
[[Page 19748]]
Table 1--Restrictions for Transitioned and Last Third Organic Dairy
Animals
------------------------------------------------------------------------
Last third organic animals Transitioned animals
------------------------------------------------------------------------
May move between organic operations.... May not move between organic
operations, except in case of
Administrator-approved
variance at 205.236(d).
May be eligible for organic slaughter Not eligible for organic
(if also not treated with synthetic slaughter.
parasiticides that appear on the
National List).
------------------------------------------------------------------------
Below we describe the final rule, including the variance request
procedures and criteria, and respond to comments received on the
proposed rule.
i. Dairy Transition--Comments and Revisions
Section 205.236(a)(2)--
AMS made two important revisions to this section in response to
comments. First, AMS revised the regulated entity from ``producer'' to
``operation,'' to be consistent with the current regulations. Second,
AMS prohibited certified organic operations from sourcing transitioned
animals from other organic operations. These two changes work in tandem
to result in a rule that meets AMS policy goals, best responds to
public comment, and can be clearly implemented and enforced by
certifying agents and AMS. Based on public comments, AMS is confident
that the policy choices in this rule align with practices that many
certifiers and most organic operations already follow, and align with
public comments on the rule.
The revisions and final requirements are discussed in more detail
below.
Operation as regulated entity (Sec. 205.236(a)(2)): AMS received
many comments on the appropriate regulated entity (e.g., producer,
operation, owner, etc.) that should be eligible for the one-time
transition. In 2021, AMS specifically requested comments on this topic.
Comments were received from producers, certifying agents, consumers/
citizens, producer groups, consumer groups, trade associations,
handlers, and a foreign government.
The regulated entity establishes who is eligible to transition
dairy animals to organic production. The USDA organic regulations
consider the certified operation to be the regulatory unit. In the
proposed rule, however, AMS selected ``producer'' as the regulatory
unit. Few commenters supported that option. Most comments recommended
changing the regulatory unit to ``operation'' or a variation such as
``certified operation'' or ``dairy operation.''
Others recommended AMS prohibit ``persons responsibly connected''
to a transitioned dairy from ever transitioning animals in the future.
The term ``responsibly connected'' is currently defined in the
regulations (Sec. 205.2) as ``any person who is a partner, officer,
director, holder, manager or owner of 10 percent or more of the voting
stock of an applicant or a recipient of certification or
accreditation.'' A subset of the comments that recommended the
aforementioned prohibition on ``persons responsibly connected'' also
recommended revising the definition of that term to include persons
with at least a 20 percent ownership share in the operation, rather
than 10 percent. Finally, several commenters wanted a less stringent
regulatory unit to allow organic operations to continually transition
dairy animals, as needed, into organic production.
AMS revised the language for this final rule in response to
comments and to clarify the existing USDA organic regulations. The
final rule specifies that an operation (rather than a producer in the
proposed rule) has one opportunity to transition animals. This
definition of ``operation'' best captures the more expansive
understanding of an ``entire, distinct herd'' in the current
regulations, under which dairy operations have been allowed to use the
transition exception only once (i.e., when they initially converted
their farm's entire nonorganic ``herd'' to organic production). AMS
adopted ``operation'' as the regulated unit for the following
additional reasons:
1. As noted, the term ``operation'' is consistent with how the
organic regulations are currently administered by AMS and certifying
agents. For example, certifying agents issue adverse actions (notices
of noncompliance, etc.) to certified operations. The term ``operation''
aligns with the term used in NOSB's most recent 2006 recommendation and
it reflects common usage by industry.
2. Comments received indicate that the term ``producer'' can be
interpreted in different ways. For example, the definition of
``producer'' in Sec. 205.2 includes the word ``person.'' Commenters
took this to mean different things, with some understanding it to mean
an individual human (i.e., a natural person) while others understood it
to mean a ``person'' as separately defined at Sec. 205.2. The
definition of ``person'' at Sec. 205.2 is not limited to individuals
and includes various types of business entities. AMS determined that
different interpretations of the term ``producer'' would lead to
differences in how certifying agents enforce the requirements, and this
would be an unacceptable outcome of the rulemaking.
3. Certifying agents argued that it would be simpler to verify an
operation's eligibility (as opposed to a producer's eligibility) to
transition animals. Certifying agents are responsible for verifying
eligibility during the application process. AMS has revised the
regulated entity to ensure the certification process remains
straightforward and that the requirements are enforceable.
4. Many comments noted that regulating ``producers,'' as proposed,
could restrict people associated with a dairy from starting their own
dairies. This could include business partners, managers, and family
members. AMS determined that ``operation'' as the regulated entity most
simply allows people who might be associated with a certified dairy to
go out and start their own organic dairy operation by allowing them to
transition nonorganic animals to organic production.
5. AMS recognizes there are multiple scenarios where producers that
previously operated an organic dairy may wish to start a new dairy
operation. For example, dairies may go out of business or be sold
entirely, and the same people may later wish to start new operations.
The final rule permits only operations that are both (1) not certified
for livestock production and (2) have never transitioned animals to use
the one-time exception for transitioning animals.
6. AMS did not select a stricter regulatory unit, such as ``persons
responsibly connected,'' that is stricter than an organic dairy that
has transitioned, for several reasons. AMS was concerned the
requirement could not be easily verified by certifying agents and/or
that it could create delays and/or unnecessary obstacles in the
certification process. AMS was also concerned that it could prevent
people
[[Page 19749]]
from using the exception in cases where it would be reasonable.
Another overarching reason for selecting ``operation'' as the
regulated entity is that this final rule prohibits the movement of
transitioned animals between organic operations. This revision supports
our intent to prohibit any certified organic operation from continually
sourcing transitioned animals. For implementation and oversight
purposes, this aligns well with the policy choice to select a simpler
regulatory unit (``operation'') that aligns with the rest of the USDA
organic regulations and the existing framework for certification and
oversight. New operations may transition animals into organic
management; existing organic operations may not. These revisions are
discussed further below.
Prohibition on sourcing transitioned animals (Sec. 205.236(a)(2)):
AMS specifies in this section that organic operations may not source
transitioned animals, except in the case of variances granted by the
Administrator. Prohibiting the sourcing of transitioned animals is
intended to prevent new heifer replacement operations from being
repeatedly established to provide an ongoing source of transitioned
animals. Otherwise, the movement of transitioned animals could allow
operations to use just transitioned dairy animals to bypass the
restrictions and purpose of the one-time transition period.
This policy choice is consistent with public comments on this rule.
The demand induced by allowing certified farms to continually source
transitioned animals would produce a corresponding incentive for other
businesses to continually open new organic operations to provide
transitioned cows into the market. This is not the original intent of
our regulations, nor the desired policy outcome. As such, AMS is making
the policy choice to achieve the policy goal of having more organic
animals under organic management for their full lives.
Without preventing the sourcing of transitioned animals, AMS would
expect an influx of transitioned animals, as some organic dairies would
pursue the practice of purchasing transitioned animals from newly
created heifer replacement operations. Given the policy choice to limit
transitions in the market to new operations only, with a limited
variance process, AMS believes that limiting the transition between
operations to better manage supply and demand dynamics, and removing
incentives for continuous transition practices to continue would better
support that policy.
AMS received many comments on this topic over the three comment
periods, starting in 2015. In 2021, AMS specifically requested comments
on whether the final rule should prohibit organic dairy operations from
acquiring transitioned animals. AMS received many comments supporting
this choice, as well as comments opposing it. Ultimately, AMS agrees
with comments that a prohibition on the movement of transitioned
animals between organic operations facilitates achieving our regulatory
objective to increase the number of livestock that are managed as
organic throughout their lives. In the final rule, AMS included this
provision in Sec. 205.236(a)(2) and removed the two proposed sections
205.236(viii) and (ix) that would have allowed transitioned animals to
move between organic operations. Certified operations may request a
variance from the prohibition on the movement of transitioned animals
for specific circumstances, as described in Sec. 205.236(d).
The rule is not intended to restrict entry of legitimate new
participants into the organic market, and transitions continue to be
allowed for new operations after not less than a 12-month period of
organic management. Transitions would also be allowed if a variance is
granted (explained further below). These transition allowances reduce
the costs of converting to organic production, and will continue to be
an important incentive for eligible nonorganic dairy farms to convert
to organic. However, once established, the certified organic farm would
then need to use organic dairy animals that have been organically
managed from the last third of gestation.
Examples of Rule Implementation. Several examples are provided
below to clarify the final rule's requirements at Sec. 205.236(a)(2),
and to explain how cows may be transferred between operations:
<bullet> Organic dairy animals (organically managed from the last
third of gestation) may be transferred between new and existing organic
operations at any time. A certified dairy operation that cannot raise
enough organic animals (organically managed from the last third of
gestation) on-farm to maintain its herd may source animals managed
organically from the last third of gestation from other organic
operations.
<bullet> A new farmer or conventional operation may apply for both
crops and livestock certification and use the transition allowance to
start a dairy. Further, a certified crop operation that has never
transitioned animals may add a dairy to its certification and use the
transition allowance to start the dairy.
<bullet> For example, if a certified dairy farmer wants to pass
transitioned animals to a family member, that family member could apply
for organic certification as a new certified operation, and bring the
transitioned animals into that operation under the one-time transition
allowance.
<bullet> Another option for facilitating intergenerational
transfers of transitioned animals would be for a family member to join
an existing certified organic dairy with transitioned animals. The
establishment of the regulatory unit as the ``operation'' allows family
members to join in the ownership and operation of an existing organic
operation, allowing the receiving generation to receive the cows that
were transitioned by the giving generation, because they are part of
the operation that transitioned the animals.
<bullet> Two (or more) operations will not generally produce
organic milk on the same premises (i.e., use the same land and milking
parlor). More than one operation owned by the same person(s) and
producing milk at the same location (with each transitioning a group of
animals) goes against the intent of this final rule. However, multiple
people (like parent/child family members) can be responsible parties
for a single operation and new responsible parties to an operation can
be added over time.
<bullet> Nothing in the rule prevents transitioned animals from
being sold to other farms as conventional animals; a transitioned
animal started life as a conventional animal and can return to
conventional production if an organic farm with transitioned animals
wishes to sell its herd. Organic dairy animals (organically managed
from the last third of gestation) may be transferred as organic to
other organic farms (new or established). This reflects the difference
in economic investment in the transitioned animal compared with the
``organic for life'' animal.
<bullet> The term ``source'' at Sec. 205.236(a)(2) is intended to
have a meaning that is broader than ``purchase.'' For example, the term
``source'' would include acquisition of animals when the transaction
does do not include a financial exchange (e.g., transfers).
<bullet> Additionally, an organic livestock operation could not
source transitioned animals under a scheme where transitioned animals
are milked but not owned by that organic operation, as a means of
continually bringing transitioned animals into milk production. For
example, Operation A could not source transitioned animals from
Operation B, Operation C, Operation D (etc.), even if Operation A does
not own the transitioned animals
[[Page 19750]]
from Operation B, Operation C, (etc.). Certifying agents must review an
applicant's organic system plan (and annually thereafter) to ensure
that no operation, once certified, sources transitioned animals.
<bullet> A heifer-raising operation, like a dairy, may not
continually transition nonorganic animals. Once an eligible (e.g.,
nonorganic) heifer-raising operation transitions animals under the one-
time exception, it may source only organic animals (organically managed
from the last third of gestation). Heifer-raising operations may not
provide transitioned animals to an already certified organic operation
that has completed its one-time transition.
Administrator Variances for Movement of Transitioned Animals (Sec.
205.236(d))
In the final rule, AMS is providing for a variance request process
that is specific to the prohibition on the movement of transitioned
animals. In the proposed rule, AMS asked whether any exceptions or
variances should be granted. Many comments noted existing sections of
the organic regulations that already provide for temporary variances in
the case of extreme weather events or disease, for example (Sec. Sec.
205.290 and 205.672).
However, a few commenters noted some movement of transitioned
animals between farms would be appropriate and could happen without
undermining the intent of the rule to limit operations from continually
transitioning animals. These comments either noted that a transitioned
animal producing organic milk on one farm should be allowed to produce
on any organic farm, or noted that there were ``common sense''
situations where movement of transitioned animals would not run counter
to the intent of the rule.
One comment noted that prohibiting sale of transitioned animals
could hurt family farmers, and as noted above, another argued that
while there should be strict requirements on herd conversions, there
should also be flexibility for ``reasonable'' or ``common sense''
movement of transitioned animals to allow an operation to capture the
value of the animal and/or to allow an organic (transitioned) animal to
continue to produce organic milk on a different organic farm.
AMS believes that a prohibition on the movement of transitioned
animals is necessary to prevent ongoing creation of organic operations
(e.g., heifer replacement operations) that would supply organic dairies
with transitioned animals in an ongoing manner. AMS has discussed the
reasons for this prohibition throughout this final rule. However, AMS
also recognizes that there are certain limited, legitimate, and
reasonable situations where movement of transitioned animals between
operations is warranted. Sections 205.290 and 205.672 of the existing
regulations allow all operations to use variances in extreme or
unexpected conditions. Section 205.272 allows for the re-transitioning
of dairy animals (over 12 months) in cases of Federal or State
emergency disease treatments. Section 205.290 allows variances from
portions of the regulations (but would not permit the use of prohibited
substances or nonorganic feed) in the case of natural disasters, damage
from weather, fires, or other business interruptions.
However, these sections do not sufficiently meet the needs of the
situations pointed out in public comments, like bankruptcy, insolvency,
and intergenerational transfer. Small dairy farmers who are more
vulnerable to financial stress may need relief in these situations.\18\
The Organic Integrity Database listings that include data at the dairy
animal level indicate that, since 2016, operations that have
surrendered their organic dairy certification have been small organic
dairies as defined by the Small Business Administration (SBA) in 13 CFR
part 121.\19\ AMS seeks to ensure operations are not unduly impacted by
the prohibition on the movement of transitioned animals, especially in
times of financial hardship or intergenerational transfer.
---------------------------------------------------------------------------
\18\ McDonald, J.M., Law, J., & Mosheim, R. (2020).
Consolidation in US dairy farming (USDA ERS. No. 1473-2020-607).
\19\ Using the Organic Integrity Database, AMS identified dairy
cattle operations with listed organic animals that were surrendered
their organic dairy certification between 2016-2021 that would have
been labeled a small business under 13 CFR part 121.
---------------------------------------------------------------------------
In the final rule, AMS has included provisions that allow the
Administrator \20\ to issue a variance and allow the movement of
transitioned animals between operations. This variance request process
is specific to the Origin of Livestock provisions, but mirrors the
existing temporary variance provisions in the regulations at Sec.
205.290. Under the process described in the NOP Program Handbook,\21\
the operation must submit their request for a temporary variance in
writing to their certifying agent and include supporting documentation
justifying the need for the temporary variance. The certifying agent
reviews the request to determine whether the request comports with the
reasons listed at Sec. 205.290(a), and whether the documentation
provided by the operation justifies the need for the temporary
variance. The certifying agent submits the request to AMS, including
the original request and supporting documentation, and recommends
either granting or denying the temporary variance along with the
reasons for their recommendation, and includes any additional
documentation that supports their recommendation. A list of temporary
variances that are in effect and that were denied are available to the
public at <a href="https://www.ams.usda.gov/rules-regulations/organic">https://www.ams.usda.gov/rules-regulations/organic</a>. Temporary
variance denial decisions are not appealable; however, an operation can
appeal a proposed adverse action if they are not able to meet the
regulatory requirements because a temporary variance has been denied.
---------------------------------------------------------------------------
\20\ The Administrator includes a ``representative to whom
authority has been delegated to act in the stead of the
Administrator'' which could be the NOP Program Manager, i.e. the NOP
Deputy Administrator.
\21\ NOP Program Handbook, NOP 2606 Instruction: Temporary
Variances. Available at: <a href="https://www.ams.usda.gov/sites/default/files/media/Program%20Handbk_TOC.pdf">https://www.ams.usda.gov/sites/default/files/media/Program%20Handbk_TOC.pdf</a>.
---------------------------------------------------------------------------
AMS considered allowing certifying agents to decide variance
requests but decided to retain those decisions at the Administrator
level similar to the existing temporary variance process at Sec.
205.290. By requiring operations to seek approval from the
Administrator rather than individual certifying agents, AMS believes
that the process will result in more consistent decision-making. AMS is
best positioned to make these decisions (vs. certifiers) because it can
most easily request information from any accredited certifier. AMS
anticipates that it may need to obtain or verify information from more
than one certifier to assess the variance request. AMS is also best
positioned to track whether any one operation is making multiple
variance requests as a means to continually source transitioned
animals.
The new Origin of Livestock paragraph describing this type of
variance identifies the scenarios for which a variance could be granted
and describes the process for requesting a variance. The limited
circumstances in which a variance may be granted will prevent this
process from being used as a mechanism for an operation to continually
source transitioned animals. The variance must be submitted to NOP
through a certifier and will be considered by the Administrator against
the limited circumstances listed in the regulation in Sec.
205.236(d)(1).
Variances will be made only for businesses that are ``small,'' as
determined by the Small Business Administration (SBA) in the small
business size regulations (13 CFR part 121). Those regulations
currently establish that a dairy cattle operation is
[[Page 19751]]
a small business if it takes in less than one million dollars in annual
receipts. AMS is limiting variances to small businesses only to
minimize adverse economic impact on small entities, as directed by the
Regulatory Flexibility Act.
The variance requestor must provide documentation to support the
request (e.g., contracts, evidence of forced/sale closure, family
records, wills or trusts, bankruptcy filings, tax documentation,
records to support size standard). This variance is specifically
crafted to address concerns about intergenerational transfers, forced
sale or bankruptcy proceedings, and liquidity needs of dairy operations
ceasing operations that may be hampered by the restriction on the
sourcing of transitioned animals. AMS does not intend for these
variances to become an avenue for operations to use out of convenience
or to create a market for transitioned animals.
Section 205.236(a)(2)(i)--
In the final rule, this paragraph specifies that the transition
period must be continuous and must last at least 12 months. AMS moved a
portion of the language included at Sec. 205.236(a)(2) and combined it
with similar text in Sec. 205.236(a)(2)(i) to reduce regulatory
language and increase clarity. AMS also added language to clarify that
an operation using the one-time transition must be certified before it
may represent or sell products as organic.
Section 205.236(a)(2)(ii)--
In this section of the final rule, AMS added requirements for an
operation to describe its transition plan in its organic system plan,
including the actual or anticipated start date of the 12-month
transition period and the identity (e.g., ear tag numbers) of animals
to transition. The means of identifying animals may vary by operation
but must be reviewed and approved by the certifying agent. AMS believes
this information is necessary for certifying agents to determine
compliance and to provide for traceability of transitioned animals.
Certifying agents may also require any additional information about the
transition that they deem necessary to determine compliance.
AMS also revised this paragraph to reflect the timing for when an
operation must apply for certification. An operation must submit an
application to begin the certification process, and an operation must
be certified before it can legally sell, label, or represent product as
organic. This means that the transition period may exceed 12 months if
the operation has applied for certification but is not yet certified
after 12 months has passed. In this case, the animals would continue to
be transitioning under continuous organic management until
certification is complete. See below for further discussion of changes
requested but not made by AMS (``Applying for Certification--
Timeline'').
Section 205.236(a)(2)(iii)--
Some commenters requested that AMS clarify that third-year
transitional crops may be consumed by dairy animals during their
transition only if those third-year transitional crops are produced by
the operation transitioning to organic.
AMS agrees that the OFPA transition requirements (7 U.S.C.
6509(e)(2)(B)) limit transitioning operations' use of third-year
transitional crops to their own operation. AMS has revised the final
rule, Sec. 205.236(a)(2)(iii), to more clearly align with OFPA by
clarifying transitioning dairy animals may consume third-year
transitional crops grown by the operation only. Allowed third-year
transitional crops include those grown by the operation on land that is
leased or rented and included in the organic system plan of the
transitioning operation. AMS has also clarified that certified organic
feed is to be fed during the 12-month transition, in addition to third-
year transitional crops.
Section 205.236(a)(2)(iv)
AMS made a minor change to this section between the proposed
regulations and the final rule to clarify our meaning. See discussion
below of Dairy Transition--Changes Requested but Not Made.
Section 205.236(a)(2)(v)--
In the final rule, AMS made minor revisions to this paragraph in
response to a comment that transitioned animals are a class of
``organic'' animal. In the proposed rule, AMS had used the term
``organic'' to mean animals that are under organic management from the
last third of gestation. The final rule revises the language to clarify
that these animals are the same as any animal managed organically from
the last third of gestation.
Section 205.236(a)(2)(vi)--
This paragraph sets the requirement that all dairy animals must end
the transition at the same time. This reiterates that the transition
exception is a distinct opportunity with a definitive end. Once the
transition is complete, an operation may not add additional
transitioned animals to its operation. The requirement that all animals
end the transition at the same time prevents operations from sourcing
additional nonorganic animals after they have begun their one-time 12-
month transition period (unless they wish to restart the 12-month
transition period for the entire group).
This requirement is not intended to limit animals born during the
transition period to transitioning animals (dams) from joining the
organic herd. In some scenarios (e.g., operations that transition
animals using third-year transitional feeds), animals born during the
12-month transition period may not complete 12 months of organic
management by the end of the transition period. For example,
transitioning animals bred after the start of the transition may birth
animals toward the end of the 12-month transition period. These animals
still may be added to the operation's herd. Animals born during the
transition must be under continuous organic management from birth and
for no less than 12 months immediately prior to the production of
organic milk to qualify for organic certification.
Certifying agents will need to ensure that operations correctly
classify animals as transitioned animals (as opposed to organically
managed from the last third of gestation), as these animals do not meet
the requirements for organic slaughter stock and may not be sourced by
organic dairies (Sec. 205.236(a)(2)). An example is provided below to
clarify how to classify animals born to transitioning animals during
the transition period.
For example (this example assumes the operation does not feed
third-year transitional crops during transition but, rather, feeds
certified organic feed and pasture): The offspring of a pregnant cow
that calves within the first three months of the transition cannot be
considered organic from the last third of gestation (assume a gestation
time of 9 months for this discussion). In this case, the heifer calf is
considered a transitioned animal. Its transition will be completed
after 12-months, at the same time its mother completes transition
(i.e., the organic management of the pregnant mother during the last
third of gestation also counts toward the 12-month transition of the
offspring). In contrast, offspring born after the first three months of
the transition period will be considered organically managed from the
last third of gestation (i.e., the mother is under organic management
during the entire last third of gestation). This aligns with the
requirement for nonorganic breeder stock (i.e., the requirements are no
stricter).
[[Page 19752]]
Section 205.236(a)(vii)--
One commenter suggested that AMS include ``milk products'' in
addition to ``milk'' in Sec. 205.236(a)(2)(vii) to clarify that
products other than milk can be produced by transitioned animals. AMS
agrees and we have revised this section in the final rule to refer to
both milk and milk products and to clarify our meaning.
Sections 205.236(a)(2)(viii) and (ix)--
The final rule prohibits certified operations from sourcing
transitioned animals after completing the one-time transition (Sec.
205.236(a)(2)), except in the case of variances granted by the
Administrator (Sec. 205.236(d)).
The proposed rule would have allowed transitioned animals to
produce organic milk on any organic farm. In effect, this would have
allowed certified operations to purchase transitioned animals for
organic milk production. In 2015, AMS received 989 comments in support
of changing the final rule to ban the sale of transitioned animals
between organic operations. Commenters included consumers, producers,
certifying agents, producer groups, consumer groups, and trade
associations. In 2019, AMS received additional comments that
transitioned animals should not be sold to organic operations for
organic milk production. AMS specifically sought comments on this topic
in 2021, with most commenters in support of transitioned animals losing
organic status if sold, transferred, given, or otherwise moved to
another operation, or if included as part of a merger of organic
operations in which ownership remains with the original certified
operation but there is common management. A few commenters were opposed
to limiting the movement or sale of transitioned animals under the one-
time allowance, citing a potential burden on family farms, a lack of
rationale for the prohibition, and a lack of oversight necessary to
enforce this prohibition.
Other commenters were concerned that by allowing sales of
transitioned animals between operations, AMS's rule would not
effectively stop operations from continually acquiring transitioned
animals. If organic operations could find loopholes to continue to
produce transitioned animals, there would be a market for those
transitioned animals. To prevent this activity, many commenters
suggested that AMS prohibit the sale of transitioned animals between
operations altogether.
AMS considered different options to ensure the final rule is clear
and enforceable. AMS determined that prohibiting certified operations
from sourcing transitioned animals (with limited exceptions at Sec.
205.236(d)) best supports the policy goal. This policy choice is
consistent with public comments advocating for this rule.
For example, based on public comments, academic literature, and the
existing regulations, AMS believes that consumers expect that organic
animals have not been treated with antibiotics; however, a transitioned
cow producing organic milk may have been treated with antibiotics early
in life, before the transition began.<SUP>22 23</SUP> Beef labeled as
organic must have been produced from an animal that had been organic
for its whole life. It is reasonable to conclude that a consumer would
prefer milk from cows (or goats, etc.) that had never been treated with
antibiotics given that prohibition with other forms of livestock; while
still allowing for the one-time transition allowed under OFPA. Another
example is outdoor access; AMS believes that consumers generally prefer
that organic animals have access to outdoors throughout their lives, as
per the existing regulations; however, transitioned animals do not
manifest a full life of these benefits.\24\ Constraining the movement
of transitioned cows between operations is expected to decrease the
overall number of transitioned animals industry-wide over time
---------------------------------------------------------------------------
\22\ Hughner, R.S., McDonagh, P., Prothero, A., Shultz, C.J., &
Stanton, J. (2007) Who are organic food consumers? A compilation and
review of why people purchase organic food. Journal of Consumer
Behaviour: An International Research Review, 6(2-3), 94-110.
\23\ Wemette, M., Safi, A.G., Wolverton, A.K., Beauvais, W.,
Shapiro, M., Moroni, P., . . . & Ivanek, R. (2021). Public
perceptions of antibiotic use on dairy farms in the United States.
Journal of Dairy Science, 104(3), 2807-2821.
\24\ Dangi, N., Gupta, S.K., & Narula, S.A. (2020). Consumer
buying behaviour and purchase intention of organic food: a
conceptual framework. Management of Environmental Quality: An
International Journal.
---------------------------------------------------------------------------
AMS removed Sec. 205.236(a)(2)(viii) and (ix) and included the
revised requirement at Sec. 205.236(a)(2). Section 205.236(a)(2) of
this final rule specifies that once an eligible, newly-certified
organic livestock operation completes the one-time minimum 12-month
transition to organic, it may not source any transitioned animals. For
additional discussion about sourcing animals, see OPERATION AS
REGULATED ENTITY (Sec. 205.236(a)(2)).
Certified organic dairy operations that purchase animals,
individually or as an entire herd, may not purchase any transitioned
animals for organic milk production beginning on the compliance date.
Livestock must be under continuous organic management from the last
third of gestation (Sec. Sec. 205.236(a) and 205.236(a)(2)). The final
rule does not limit certified organic dairy operations from purchasing
animals that have been organically managed from the last third of
gestation. Nor does the final rule prohibit operations from raising and
selling organic replacement animals to certified dairy operations. Such
animals must be organically managed from the last third of gestation to
be sourced by organic operations (Sec. Sec. 205.236(a) and
205.236(a)(2)).
AMS received a comment that some nonorganic dairies convert to
organic production by purchasing certified organic dairy cows while
transitioning nonorganic animals. A dairy may wish to do this to keep
some of its own nonorganic animals (to transition) while generating
income from the organic cows. The final rule requires that all
transitioning animals complete the transition at the same time (i.e.,
at the end of a single 12-month period) at Sec. 205.236(a)(2)(vi). It
also prohibits the sourcing of transitioned animals after the one-time
transition is complete (Sec. 205.236(a)(2)), but it does not
explicitly discuss sourcing of organic animals during the transition.
AMS will allow certifiers to determine if a transitioning operation may
source organic animals during the transition, as site-specific and
other conditions will need to be evaluated to determine if an operation
could comply with all requirements. For example, if an operation
purchases lactating organic dairy animals during the transition period
but also manages lactating transitioning animals, very specific
practices would be required to keep nonorganic milk (from transitioning
animals) segregated from organic milk until the transition period is
complete.
ii. Dairy Transition--Changes Requested But Not Made
(1) Prohibit Transition Entirely (Sec. 205.236)
AMS received many comments opposed to allowing any transition of
nonorganic animals to organic production. Generally, the commenters
thought any products labeled as organic should be organically managed
from birth or from the last third of gestation and that any allowance
for transitioning nonorganic animals is unwarranted.
AMS has not prohibited transition altogether in the final rule. AMS
believes that the one-time transition allowance provides an important
and reasonable incentive for new dairies and existing nonorganic
dairies to seek organic certification. Many currently
[[Page 19753]]
certified organic dairy operations transitioned their operations to
enter the organic market, and this final rule preserves the same
opportunity for new and nonorganic operations pursuing organic
certification. For additional analysis of alternatives, see the
Regulatory Impact Analysis (RIA) below.
(2) Allow Continuous Transition--Do Not Restrict to One-Time Event
(Sec. 205.236)
For additional discussion of this alternative regulatory approach,
see the ALTERNATIVES CONSIDERED section of the Regulatory Impact
Analysis (RIA) below.
Several commenters felt that limiting producers to one transition
was unnecessarily restrictive and would create undue hardship for
organic dairy farmers. The commenters preferred that operations be
allowed to transition animals into organic production without limit and
thought 12 months of organic management was sufficient for sale of milk
as ``organic'' under OFPA. They argued that allowing producers to
transition animals without limit allows producers to respond quickly to
consumer demand and to rebuild herds in the case of disease or illness.
They also argued that the current demand for organic milk was evidence
that consumers are satisfied by the current requirements.
AMS is not allowing organic operations to continually transition
nonorganic animals into organic production in the final rule. While an
allowance to continually transition nonorganic animals would allow
producers to adjust their herd size quickly by permitting the purchase
of nonorganic animals to transition, such an allowance would also be
likely to decrease the organic management of calves. This is because
during the period of nonorganic management, producers would not be
required to adhere to the feed, healthcare, or living condition
requirements stipulated by the USDA organic regulations. Even if AMS
were not to limit transition to a one-time event, as suggested by some
comments, AMS would not expect all organic dairies to stop managing
calves and young dairy stock organically. Some producers would likely
continue to use the organic milk produced by their animals as feed for
their offspring, while others might source nonorganic milk to reduce
feed costs. AMS does not believe that all producers would adopt a
consistent practice in response to the policy, and AMS could not assure
consumers that organic dairy products are using common production
standards which are consistent a key purpose of OFPA (7 U.S.C.
6501(2)).
Furthermore, many organic stakeholders commented that the practice
of taking animals out of organic production upon birth and restarting
organic management one year prior to milk production (which is
currently allowed by some certifying agents) is inconsistent with
consumer expectations, and has led to inconsistencies in the
implementation and oversight of the organic livestock rules. As
discussed above, AMS explicitly made the policy choice to implement
provisions that increase the number of animals managed as organic from
the last third of gestation. Establishing national standards to govern
the marketing of organically produced products is a key purpose of OFPA
(7 U.S.C. 6501(1)). Further, based on public comments, AMS believes the
policy choices in this rule align with practices that many certifiers
and most organic operations already follow.<SUP>25 26</SUP>
---------------------------------------------------------------------------
\25\ See Audit Report 01601-03-Hy.
\26\ See AMS-NOP-11-0009-2799.
---------------------------------------------------------------------------
(3) Prohibit Third-Year Transitional Feed During Transition (Sec.
205.236(a)(2)(vii))
Another comment received by AMS requested that third-year
transitional crops not be allowed as feed during the transition period.
The commenter pointed out that these crops cannot be fed to organic
slaughter stock or fiber-bearing animals and argued that the allowance
for transitioning dairy stock to consume these feeds does not advance a
consistent organic standard, as intended by OFPA.
AMS recognizes that there are differences between the requirements
for transitioning dairy animals and livestock used to produce organic
meat and fiber products. AMS has not prohibited third-year transitional
crops as feed during transition in the final rule, as the allowance to
use third-year transitional crops eases the burden of transitioning for
new dairy operations and is permitted by OFPA.
(4) Prohibit Third-Year Transitional Feed for Offspring (Sec.
205.236(a)(2)(iii) and (iv) and (v) and (vi))
A commenter argued that AMS was expanding the allowance for third-
year transitional crops by allowing offspring to consume this type of
feed during the transition. They commented that OFPA does not allow
offspring born to transitioning animals to be fed crops and forage in
the third year of organic management.
AMS disagrees that OFPA limits use of third-year transitional crops
to any specific class or age of livestock during the transition. OFPA
allows third-year transitional crops to be fed to dairy animals up to
the end of the 12-month transition period. Dairy animals, regardless of
the stage of production, are equally subject to these requirements.
Restricting the use of third-year transitional crops for offspring
would impose stricter requirements for offspring born during
transition, even though these animals are managed organically for a
longer period of time prior to production of organic milk.
The final rule allows any transitioning animal to consume third-
year transitional crops during the 12-month transition, including
offspring born during the transition and young stock. Animals that
consume third-year transitional crops during the transition period are
transitioned animals, and animals born to transitioned animals that
consumed third-year transitional crops during the last third of
gestation are transitioned animals. Transitioned animals are not
eligible to produce organic meat or fiber. In addition, transitioned
dairy animals may not be sourced by certified organic dairies.
(5) Require Milk for Offspring That Is Eligible for Sale as Organic
(Sec. 205.236(a))
Some commenters pointed out that both the current organic
regulations and the proposed rule allow milk to be fed to offspring in
certain circumstances when the milk would not meet the requirements for
sale as organic. They referred to Sec. 205.237, which requires
organically produced agricultural products in livestock feed rations
and questioned how milk that does not qualify for sale as organic can
be provided to offspring. For example, the organic regulations only
require that breeder stock be managed organically starting no later
than the last third of gestation. If nonorganic breeder stock are
managed as organic only during the last third of gestation, the milk
suckled by offspring at the time of birth would not qualify for sale as
organic. Additionally, commenters also requested that AMS clarify if
milk from nonorganic animals that has been managed organically during
the last third of gestation can be provided to animals other than their
own offspring.
In the final rule, offspring born to animals that have been managed
organically starting no later than the last third of gestation can be
considered organic animals instead of transitioned animals. AMS has not
imposed stricter requirements for dairy animals than
[[Page 19754]]
those that currently exist for slaughter stock or changed the
requirements for slaughter stock, and organic slaughter stock may
receive milk that could not itself be sold as organic. AMS recognizes
that the allowance for feeding offspring milk that cannot itself be
certified and sold as organic (for human consumption) may appear
inconsistent. However, current organic regulations clearly allow
animals to be certified organic if managed organically managed starting
no later than the last third of gestation, without any prohibition on
milk nursed from the nonorganic mothers by the offspring. The final
rule does not change these requirements.
In response to comments about whether milk from nonorganic breeder
stock or transitioning animals may be provided to animals that are not
an animal's own offspring, if offspring are separated from their
mothers after birth, as is common practice on dairy farms, milk that is
pooled from a group of animals but is not comprised entirely of organic
milk may not be provided to offspring. Milk from transitioning animals
that is collected by the dairy farm and not consumed directly by the
offspring may not be sold as organic.
The final rule establishes limitations on offspring that have
consumed milk from a transitioning mother that consume(d) third-year
transitional crops during or after the last third of gestation. Calves
are considered transitioned themselves when they or their mothers
consume(d) third-year transitional crops during or after the last third
of gestation. As transitioned animals, these offspring are not eligible
for sale as organic slaughter stock and may not be sourced by organic
dairies per Sec. 205.236(a)(2).
Conversely, mothers that have been organically managed starting no
later than the last third of gestation and which are fed only organic
feed during the last third of gestation (no third-year transitional
crops) give birth to organic offspring (organically managed from the
last third of gestation) with a status similar to that of organic
slaughter stock born to nonorganic breeder stock. Organic animals
organically managed from the last third of gestation may be sold
between organic dairy farms and produce organic milk on any organic
dairy farm.
(6) Applying for Certification--Timeline (Sec. 205.236(a)(2)(ii))
AMS received comments about the proposed requirement for producers
to submit an application for certification during the 12-month
transition period, including a description of the transition. Several
commenters requested that AMS revise the requirement so producers would
be required to submit their application and describe the transition
prior to starting the 12-month transition rather than during the 12-
month transition. These commenters thought this would allow a
certifying agent to oversee the entire transition, prevent potential
infractions, and help ensure adequate recordkeeping and tracking of
transitioning animals.
Another commenter suggested that AMS require producers to apply for
certification within 90 days before or after feeding dairy animals
third-year transitional crops. Another commenter stated it was unclear
if the proposed rule changed the existing rule in regard to the
obligations and responsibilities of transitioning operations and
certifying agents. Yet another commenter pointed out that the language
in the proposed rule made it unclear if a producer could submit an
application before the transition started.
In the final rule, AMS has not required that producers submit an
application prior to starting the 12-month transition. Operations that
sell livestock or livestock products as organic, including milk, must
be certified, with the exception of those operations described in Sec.
205.101. While there are likely benefits to both producers and
certifying agents when an application is submitted early in the
transition to organic, the timing of the submission of an application
does not dictate whether an operation meets the requirements for
certification. Certifying agents are required to verify that producers
comply with all provisions of the USDA organic regulations. Producers
who choose to submit an application late in their transition may
experience delays in obtaining certification until the certifying agent
verifies that all provisions are compliant. The transitioning animals
will continue to transition through this pre-certification period;
product may not be sold or represented as organic without
certification.
Applications submitted prior to, or at any time during, the 12-
month period are all subject to the same review criteria described in
Sec. Sec. 205.400-205.406 of the current regulations. Certifying
agents who are unable to verify an applicant is in compliance with the
requirements must not grant certification.
(7) Provide 18 Months for Transition (Sec. 205.236(a)(2)(vi))
Several commenters requested that producers be given more than a
12-month period to transition to organic. Extending the period of time
from 12 months to 18 months would allow a producer to add additional
nonorganic animals to its operation for six months after the beginning
of its transition, while still requiring each animal to be managed
organically for no less than 12 months immediately prior to production
of milk to be sold, labeled, or represented as organic. Commenters
stated that a longer period would help reduce the stress associated
with starting a new dairy by allowing flexibility. Commenters stated
that by allowing additional time, new producers would be able to use
the additional time to source animals and stagger when animals start to
transition to reduce the financial burden of transition.
AMS understands that transitioning a dairy to organic can be
financially and logistically challenging. However, AMS is maintaining,
as proposed, the 12-month transition requirement. While AMS recognizes
that a longer period for the transition would likely ease some of the
challenges of transition, AMS finds a 12-month total allowance is still
appropriate. AMS did not find broad support for this option in
comments, and verification of compliance is simpler when animals are
transitioned as one group. Under the final rule, producers are not
prevented from sourcing animals for the transition over a period of
time, but the group must transition together. For example, a farm could
gradually acquire nonorganic animals for six months prior to starting
the 12-month transition, begin the transition once all animals arrive
on the farm, and then end the transition for all animals at the same
time. Additionally, the regulations allow new operations and certified
operations to purchase dairy animals at any time, provided they have
been managed organically from the last third of gestation.
(8) Do Not Limit Transition for Goat Operations (Sec. 205.236(a)(2))
AMS received a few comments regarding non-bovine animals (e.g.,
sheep or goats). Several commenters stated that the proposed rule would
have a greater impact on goat operations than cattle operations, as
there are fewer non-bovine dairy operations and sourcing organic
replacements may be difficult. One commenter requested that AMS allow
goat operations to continuously transition animals on existing
operations. The commenter stated that goat producers are continually
striving to improve their genetics and that, if limited to purchasing
organic goats, the producers could not efficiently improve the genetics
of the herd. The commenter
[[Page 19755]]
stated that under the rule, new genetics would need to be introduced by
obtaining nonorganic bucks alone, rather than nonorganic does and
bucks.
AMS recognizes that the availability of organic (last third of
gestation) non-bovine animals for sale is limited; however, AMS is not
making an exception to the one-time transition for non-bovine
operations in the final rule. AMS does not believe there is a
difference in consumer expectations for these milks compared to organic
cow milk. Given the policy choice, based an agency analysis and public
comments, to increase the number of animals managed as organic from the
last third of gestation, it is appropriate to require goats to meet the
same requirements as cows. Additionally, as described below, producers
may purchase nonorganic male breeder stock and nonorganic female
breeder stock, at any time, for the production of organic offspring.
Breeder stock that are not transitioned as part of the initial herd may
not produce milk to be sold, labeled, or represented as organic.
C. Breeder Stock (Sec. 205.236(a)(3))
This section of the final rule describes the provisions for
bringing on breeder stock from a non-organic operation to an organic
operation. The provision stipulates that breeder stock must be brought
onto an operation by the last third of gestation and must be
organically managed from the last third of gestation through the period
in which the breeder stock is nursing its offspring. No changes were
made to this section between the proposed regulations and the final
rule. Below we describe the final rule and respond to comments received
on the proposed rule.
i. Breeder Stock--Changes Requested But Not Made
(1) Require Organic Management of Breeder Stock (Sec. 205.236(a)(3))
In 2015, AMS received many comments that expressed opposition to
allowing breeder stock to rotate in and out of organic management.
Commenters generally requested that the final rule require
uninterrupted organic management of breeder stock starting from the
time they are brought onto an organic operation. Commenters requested
that if the organic management of nonorganic breeder stock is
interrupted, the breeder stock can no longer produce organic offspring.
In 2019, AMS received additional comments that discussed this
issue. As in 2015, comments predominantly supported modifying the
current language in the proposed rule to stipulate that breeder stock
can be transitioned only once to organic management. These commenters
cited organic herd health and consistency with the language in OFPA as
their principal factors. One commenter further referenced the OFPA
provision related to breeder stock and argued that the proposed rule
language allowing breeder stock to be transitioned from nonorganic to
organic at any time is inconsistent with the intent of OFPA. One
commenter noted that modifying the current language in the proposed
rule stipulating breeder stock may be transitioned to organic
management only once would be inconsistent with language in OFPA that
states ``any source.'' This commenter recommended that these advocates
work with Congress rather than the USDA to achieve these changes.
AMS has not revised the requirements for breeder stock in the final
rule. OFPA states that breeder stock may be purchased from any source
(7 U.S.C. 6509(b)); there is no requirement that the source be
certified organic. Further, while the current regulations at Sec.
205.236(b)(1) clarify that organic livestock removed from organic
operations lose their organic status, this provision does not extend to
nonorganic breeder stock that are themselves not certified organic or
eligible for slaughter, sale, or labeling as organic (Sec.
205.236(b)(2)). Therefore, AMS does not believe that restrictions on
how nonorganic breeder stock are managed outside of the last third of
gestation and after the weaning of organic offspring are warranted.
However, AMS is establishing requirements for the management of
nonorganic breeder stock during the last third of gestation and while
an organic offspring is consuming milk from the nonorganic breeder
stock after birth. Additionally, a producer must continue to prevent
commingling of organic and nonorganic products and prevent contact of
any organic production or products with prohibited substances (7 CFR
205.201(a)(5)).
(2) Change Regulatory Text From ``Brought'' To ``Purchase'' (Sec.
205.236(a)(3))
Several comments requested that AMS change the language at Sec.
205.236(a)(3) to only allow organic operations to ``purchase''
nonorganic breeder stock rather than allow breeder stock to be
``brought'' onto organic operations, as currently allowed. Commenters
pointed out that OFPA language allows for organic operations to
purchase nonorganic breeder stock and that this implies the breeder
stock are to be managed organically following purchase. By changing the
language to align with OFPA, the commenters argue breeder stock would
no longer go in and out of organic management while managed at the
operation.
AMS is not convinced that changing the regulations to allow
purchase of nonorganic breeder stock at any time would be significantly
different than the current regulation. Furthermore, as nonorganic
animals, breeder stock are not regulated under USDA organic
regulations, except during the last third of gestation when producing
organic offspring and/or nursing their organic offspring.
(3) Require One Year of Organic Management Prior To Allowing Calves To
Consume Milk (Sec. 205.236)
See discussion above in Dairy Transition--Changes Requested but Not
Made, titled ``Require Milk for Offspring that is Eligible for Sale as
Organic''.
(4) Allow Milk Suckled by Animals Other Than Own Calf (Sec. 205.236)
See discussion above in Dairy Transition--Changes Requested but Not
Made, titled ``Require Milk for Offspring that is Eligible for Sale as
Organic.''
(5) Clarify the Status of Male Animals for Breeding (Sec.
205.236(a)(2)(ix))
Some commenters noted that the wording of proposed Sec.
205.236(a)(2)(ix) implies that male animals cannot be brought onto an
organic operation for breeding purposes. They proposed including
language affirming that male breeder stock may be used at any time and
won't be required to be managed organically.
AMS has not made any changes and points out that this section
describes requirements for dairy animals used ``for organic milk
production,'' which do not include male animals. Breeder stock are
defined at Sec. 205.2 as female livestock. The use of nonorganic male
animals for breeding purposes is not restricted by this section or by
other sections of the organic regulations.
D. Prohibitions (Sec. 205.236(b))
This section of the final rule stipulates that product from animals
from removed from organic management to a nonorganic operation cannot
be sold as organic and breeder stock and transitioned animals not under
continuous management since the last third of gestation may not be
sold, labeled, or represented as organic slaughter stock. Below we
describe the final rule and respond to comments received on the
proposed rule.
[[Page 19756]]
i. Prohibitions--Comments and Revisions
Section 205.236(b)(1)--A commenter thought AMS should specify in
this section that handling organic livestock products at a nonorganic
operation affects the organic status of products, as the term AMS used
(``managed'') does not apply well to edible and nonedible products. The
commenter suggested that ``managed'' be changed to ``managed or
handled''.
AMS agrees that the term ``managed'' is better used to describe
activities related to livestock production than it is suited to
describe activities (e.g., processing) related to livestock products.
In the final rule, AMS has removed the reference to livestock products
from this section after concluding that it is not necessary to discuss
livestock products in this section. Requirements related to the
handling, processing, and labeling of organic products are covered at
length and in detail under other sections of the USDA organic
regulations. Other sections of the regulations also address the types
of operations that must be certified organic, and AMS is preparing a
separate final rule to clarify requirements for operations that handle
organic products and to clarify which operations are exempt from the
requirements of certification (see proposed rule at 85 FR 47536).
Section 205.236(b)(2)--AMS revised the proposed term ``dairy
stock'' to ``dairy animals'' in the final rule to be consistent with
language used throughout Sec. 205.236(a).
E. Records (Sec. 205.236(c))
Section 205.236(c) amends the current regulations to specifically
require that an operation's records identify whether dairy animals were
transitioned to organic. These records are required for certifiers to
verify compliance, as organic operations may not source transitioned
animals after their one-time transition is complete (Sec.
205.236(a)(2)). Additionally, transitioned animals may not be
represented as organic slaughter stock. These requirements support the
livestock recordkeeping requirements described in OFPA (7 U.S.C.
6509(f)) and the USDA organic regulations at 7 CFR 205.103. No changes
were made to this section between the proposed rule and the final rule.
F. Administrator Variances for Movement of Transitioned Animals (Sec.
205.236(d))
This added section of the final rule includes provisions to allow
for movement of transitioned animals in certain situations. See
discussion above in ``DAIRY TRANSITION (Sec. 205.236(a)(2)).''
G. Livestock Feed (Sec. 205.237(a))
This section of the final rule includes a revision to the livestock
feed requirements. Below we describe the final rule and changes from
the proposed rule.
i. Livestock Feed--Revisions
In the final rule, Sec. 205.237(a) was revised to include a
reference to Sec. 205.236(a)(3), which allows offspring to consume
milk from nonorganic breeder stock. The reference to these requirements
is made here to recognize that milk from breeder stock is not
necessarily certified organic. Section 205.236(a)(3) requires
operations to provide breeder stock with organic feed throughout the
last third of gestation and during the lactation period, during which
time they may nurse their own offspring. The reference to these
requirements in Sec. 205.237(a) is intended to provide a more complete
description of the livestock feed requirements. The update to this
section does not permit the feeding of milk from breeder stock to
organic animals other than the breeder stock's offspring.
H. Other Amendments Considered
i. Other Amendments Considered--Changes Requested But Not Made
(1) Fiber Producing Animals (Sec. 205.236(b)(2))
AMS received several comments about the sections of the proposed
rule that include information about fiber-producing animals. Some
commenters argued that the rule should be revised to allow a one-time
transition for fiber-bearing animals. One comment noted that recent
changes to organic regulations align dairy and fiber animals in other
areas, such as parasiticide use, and so the rule for transitioning of
dairy animals should be the same for fiber-bearing animals. They also
stated that this revision would be consistent with other organic
livestock fiber standards around the world and excluding it would put
United States producers at a global economic disadvantage.
AMS did not propose an allowance for transition of fiber animals in
the proposed rule, so AMS is not creating an allowance for the
transition of fiber animals in the final rule. An allowance to
transition fiber animals could require amendment of OFPA, which
authorizes a transition for dairy animals only. This means that
producers can transition sheep, for example, from nonorganic milk
production to organic milk production, but would need to source animals
organically managed beginning at the last third of gestation in order
to produce organic wool.
V. Related Documents
Documents related to this final rule include the Organic Foods
Production Act of 1990, as amended, (7 U.S.C. 6501-6524) and its
implementing regulations (7 CFR part 205). AMS published a series of
proposed rules that addressed, in part, the origin of livestock
provisions at: (1) 62 FR 65850, December 16, 1997; (2) 65 FR 13511,
March 13, 2000; and (3) 71 FR 24820, April 27, 2006. Past final rules
relevant to this topic were published at: (1) 65 FR 80548, December 21,
2000; and (2) 71 FR 32803, June 7, 2006.
The NOSB deliberated and made the recommendations described in this
final rule at public meetings announced in the following Federal
Register notices: 67 FR 19375, May 7, 2002; 67 FR 54784, September 17,
2002; 67 FR 62949, October 19, 2002; and 68 FR 23277, May 13, 2003. AMS
also considered NOSB recommendations from June 2, 1994, and March 20,
1998, in the development of this final rule. NOSB meetings are open to
the public and allow for public participation. NOSB recommendations are
available on the AMS website.
Paperwork Reduction Act
This final rule is clarifying current requirements pertaining to
documenting, reporting, and recordkeeping for organic dairies and no
additional collection or recordkeeping requirements are being imposed.
In addition, AMS is prohibiting the sourcing of transitioned animals in
Sec. 205.236(a)(2) that would have allowed transitioned animals to
move between organic operations in response to public comment on the
proposed rule. However, certified operations may request a temporary
variance from the prohibition on the movement of transitioned animals
for specific circumstances, now described in Sec. 205.236(d). The
paperwork burden in the currently-approved OMB ICR# 0581-0191 \27\
includes the time and costs to comply with existing organic system plan
requirements and recordkeeping requirements, and more than accounts for
any burden associated with requesting temporary variances even with the
expanded criteria at Sec. 205.236(d).
---------------------------------------------------------------------------
\27\ Approved January 21, 2021.
---------------------------------------------------------------------------
Currently, temporary variances as described at Sec. 205.290 are
calculated at 10% or 4,628 of 46,277 total
[[Page 19757]]
operations \28\ at one hour for each variance for a total of 4,628
hours annually. Yet, there were only 10 actual temporary variances
requested in 2021 \29\ although 2 requests covered certified organic
ruminant operations in counties impacted by extreme drought that were
declared disaster areas.\30\ If we calculated 2021 as impacting 25
operations, this would amount to a total of 25 hours of impact. This
still leaves a very large annual margin of 4,603 hours under the
current information collection for all types of temporary variances.
Actual previous 10 years of requests for temporary variances averaged
about 2-7 requests per year. If all 3,134 currently certified organic
dairy producers request a temporary variance under the expanded
criteria described in Sec. 205.236(d), there would still be very large
margin of 1,469 burden hours.
---------------------------------------------------------------------------
\28\ Total number of currently certified organic operations from
Organic Integrity Database, August 7, 2019, <a href="https://organic.ams.usda.gov/Integrity">https://organic.ams.usda.gov/Integrity</a>.
\29\ Variance requests can be viewed by the public at: <a href="https://www.ams.usda.gov/rules-regulations/organic">https://www.ams.usda.gov/rules-regulations/organic</a>.
\30\ Applies only to certified organic ruminant livestock
producers located in counties designated as primary or contiguous
natural disaster areas by Secretary Vilsack. The list of declared
State counties is available on USDA's website for Disaster
Designation Information.
---------------------------------------------------------------------------
AMS recognizes that the burden for temporary variances will need to
be restructured. AMS will prepare an information collection package for
this additional burden and will ultimately merge impacts from this
final rule into OMB ICR# 0581-0191. The process for updating the NOP's
overall program ICR will begin in January 2023, and will allow an
opportunity to merge the burden from any other final rules with optimal
efficiency.
Civil Rights Review
AMS has reviewed this final rule in accordance with the Department
Regulation 4300-4, Civil Rights Impact Analysis, to address any major
civil rights impacts the final rule might have on minorities, women,
and persons with disabilities. AMS has determined that there is
evidence of an adverse impact to males, females, Hispanics, Whites,
Black/African Americans, Asian Americans, and Native Hawaiians based on
an 80 percent analysis for farms reporting 50 percent or more from
organic sales; the impact rate for American Indians/Alaskan Native does
not meet the condition for adverse impact. There are no data for a
baseline comparison for all organic dairy producers.
AMS is not aware of any data indicating organic dairy operations
owned by members of protected groups are more likely to continually
source transitioned animals. While AMS does not have specific race,
ethnicity, or gender data regarding organic livestock producers, the
rule would not alter the ability for producers of any race, color,
national origin, gender, religion, age, disability political beliefs,
sexual orientation, or marital or family status to participate in the
National Organic Program or change their protections from
discrimination.
The Agency has concluded that the final rule will impact organic
dairy producers by potentially increasing production costs for: (1)
Organic livestock and dairies that currently continually transition
nonorganic animals for use on their operation or sale; (2) organic
dairies that currently source transitioned dairy animals as
replacements; and (3) organic dairies that purchase organic replacement
animals (as increased demand could increase prices). To mitigate these
impacts, AMS is providing organic producers one year from publication
of the final rule to complete any ongoing transitions. Additionally,
any organic operations selling organic replacement heifers may benefit
from higher prices.
Executive Order 13175
This final rule has been reviewed in accordance with the
requirements of Executive Order 13175, ``Consultation and Coordination
with Indian Tribal Governments.'' Executive Order 13175 requires
Federal agencies to consult and coordinate with tribes on a government-
to-government basis on policies that have tribal implications,
including regulations, legislative comments or proposed legislation,
and other policy statements or actions that have substantial direct
effects on one or more Indian tribes, on the relationship between the
Federal Government and Indian tribes, or on the distribution of power
and responsibilities between the Federal Government and Indian tribes.
AMS has assessed the impact of this rule on Indian tribes and
determined that this rule would not, to our knowledge, have tribal
implications that require consultation under E.O. 13175. In a December
2019 AMS Quarterly Tribal Listening Session, AMS provided an overview
of this final rule and invited any requests for concerns or
consultation. AMS received no questions or comments during the
listening session. AMS has also researched its database of certified
organic dairies operating under Tribal Government and found no such
operations.
Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives, and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, reducing costs, harmonizing rules, and promoting flexibility.
AMS has prepared the RIA with the purpose of accomplishing these
objectives.
The Regulatory Flexibility Act (5 U.S.C. 601-612) requires agencies
to consider the economic impact of each rule on small entities and
evaluate alternatives that would accomplish the objectives of the rule
without unduly burdening small entities or erecting barriers that would
restrict their ability to compete in the market.
Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as not a major rule, as defined by 5 U.S.C. 804(2).
Executive Order 12988
Executive Order 12988 instructs each executive agency to adhere to
certain requirements in the development of new and revised regulations
in order to avoid unduly burdening the court system. This final rule is
not intended to have a retroactive effect.
To prevent duplicative regulation, states and local jurisdictions
are preempted under OFPA from creating programs of accreditation for
private persons or State officials who want to become certifying agents
of organic farms or handling operations. A governing State official
would have to apply to USDA to be accredited as a certifying agent, as
described in section 6514(b) of OFPA. States are also preempted under
sections 6503 and 6507 of OFPA from creating certification programs to
certify organic farms or handling operations unless the State programs
have been submitted to, and approved by, the Secretary as meeting the
requirements of OFPA.
Pursuant to section 6507 of OFPA, a State organic certification
program may contain additional requirements for the production and
handling of organically produced agricultural products that are
produced in the State and for the certification of organic farm and
handling operations located within the
[[Page 19758]]
State under certain circumstances. Such additional requirements must:
(a) Further the purposes of OFPA, (b) not be inconsistent with OFPA,
(c) not be discriminatory toward agricultural commodities organically
produced in other States, and (d) not be effective until approved by
the Secretary.
In addition, pursuant to section 6519(c)(6) of OFPA, this final
rule does not supersede or alter the authority of the Secretary under
the Federal Meat Inspection Act (21 U.S.C. 601 et seq.), the Poultry
Products Inspection Act (21 U.S.C. 451 et seq.), or the Egg Products
Inspection Act (21 U.S.C. 1031 et seq.), concerning meat, poultry, and
egg products, nor any of the authorities of the Secretary of Health and
Human Services under the Federal Food, Drug and Cosmetic Act (21 U.S.C.
301 et seq.), nor the authority of the Administrator of the EPA under
the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. 136 et
seq.).
Regulatory Impact Analysis and Regulatory Flexibility Analysis
AMS is taking this action to set origin of livestock production
practice standards for organic dairy animals, reduce variance between
the approaches taken by certifying agents, and increase the share of
organic dairy animals that are under organic management for their
entire lives. AMS updated the analysis from the proposed rule (84 FR
52041) using the most recent information about the dairy market,
including the number of certified organic operations and the number of
organic dairy animals. Updating information with NASS Organic Survey
data from 2019 revises the estimated costs of the final rule to
$615,000-$1,845,000. Below public comments on previously published
regulatory analyses are also discussed.
Need for the Rule
AMS determined that the USDA organic regulations for sourcing dairy
animals and managing breeder stock require additional specificity to
ensure organic dairy operations meet a consistent standard. AMS's
revisions of the requirements support two purposes of OFPA (7 U.S.C.
6501): To establish a national standard for organically produced
products and to assure consumers that organically produced products
meet a consistent standard. Interpretations of the ``origin of
livestock'' organic regulations have differed between certifying
agents, and the different interpretations have led to divergent
practices by organic dairy operations for sourcing replacement dairy
animals. These inconsistencies have contributed to confusion among
organic dairy producers about what the regulations require. The
inconsistencies have produced an unequal situation in which production
costs are influenced by any given certifier's interpretation of the
organic livestock regulations. However, a certifier is not likely to
publish its interpretation of the existing regulations, and a certifier
may not even apply its interpretation consistently among the operations
it certifies (some may be allowed to continually transition animals
while others are not).
AMS is revising the regulations to ensure the USDA organic
regulations are administered and enforced in a clear and uniform
manner, and to address inconsistencies determined in the 2013 USDA
Office of Inspector General (OIG) Audit.\31\ The OIG audit of organic
milk operations found that the interpretation and implementation of the
origin of livestock requirements differed across producers and
certifying agents. As a result, organic milk producers may have faced
materially different organic production requirements based on their
particular certifier's interpretation of the NOP's origin of livestock
requirements. This rulemaking will help ensure that producers face
consistent application of the organic standards. Furthermore, AMS
expects that increased clarity will help assure consumers that organic
dairy products meet a consistent standard, a stated purpose of the
Organic Foods Production Act (OFPA) of 1990 (7 U.S.C. 6501). NOP's
experience is that because organic products cannot be readily
distinguished from nonorganic products based on sight inspection,
buyers rely on process verification methods to ensure that organic
claims are true. Within the economics literature, organic food products
are ``credence goods,'' or goods with characteristics that are valuable
but are difficult to verify, both before and after
purchase.<SUP>32 33 34</SUP> Foods certified under USDA's NOP,
including milk, have a common standard that specifies production
practices, such as dairy herd pasture requirements, permitted feeds,
and permitted use of antibiotics and hormones, that cannot be
independently verified by consumers.
---------------------------------------------------------------------------
\31\ The July 2013 OIG audit report on organic milk operations
may be accessed at the following website: <a href="http://www.usda.gov/oig/webdocs/01601-0002-32.pdf">http://www.usda.gov/oig/webdocs/01601-0002-32.pdf</a>.
\32\ Caswell, Julie A. and Eliza M. Mojduszka. 1996. ``Using
Informational Labeling to Influence the Market for Quality in Food
Products.'' American Journal of Agricultural Economics. Vol. 78, No.
5: 1248-1253.
\33\ Zorn, Alexander, Christian Lippert, and Stephan Dabbert.
2009. ``Economic Concepts of Organic Certification.'' Deliverable 5
of the EU FP7 CERTCOST Project: Economic Analysis of Certification
Systems in Organic Food and Farming.
\34\ Michael Darby and Edi Karni, ``Free Competition and the
Optimal Amount of Fraud'' Journal of Law and Economics 16(1973)1:67-
88
---------------------------------------------------------------------------
When producing goods with credence characteristics, producers face
a moral hazard problem stemming from their incentive to forego taking
costly actions or investments associated with the label claim if
handlers or consumers have no way of verifying the production process
(i.e., asymmetric information). In providing guidance to Federal
agencies undertaking rulemaking, OMB Circular A-4 cites asymmetric
information as a source of market failure and as a potential
justification for regulation. However, the social benefit of addressing
an information asymmetry can be no higher than the willingness to pay
for the additional information by the party with less information.
Lassoued and Hobbs (2015) further emphasize the role of trust in the
institutions and brands that verify credence good attributes as being
essential for developing the consumer confidence that drives brand
loyalty.\35\
---------------------------------------------------------------------------
\35\ Lassoued, R. and J.E. Hobbs (2015) ``Consumer Confidence in
Credence Attributes: The Role of Brand Trust'' Food Policy 52:99-
107.
---------------------------------------------------------------------------
AMS developed the final rule in the context of maintaining
consistency and trust in the USDA organic label as directed by OFPA, as
it pertains specifically to organic dairy farms and to organic farms
and organic handlers/processors generally. AMS anticipates this final
rule will support both producer and consumer confidence in the organic
label by reducing major inconsistencies in production practices across
organic dairies, and resulting in more organic animals that are managed
organically throughout their productive lives.
Baseline
This rule specifies the conditions under which operations can
transition non-organic animals to organic for the purpose of milk
production. Current dairy production and husbandry practices provide
important context for the baseline and cost analysis. For a general
description of replacement animal production, see ``Overview of Organic
Dairy Production'' in section II. Background above.
The baseline presented below focuses on production practices of
bovine dairy farms maintaining cows and heifers and does not include
quantitative estimates for non-bovine dairy farms that maintain sheep
and goats. AMS does not expect this rule will have a substantial
economic impact on those specific sub-sectors for the following
reasons: Goat does and sheep ewes are
[[Page 19759]]
able to produce milk earlier than cows, so the potential cost-savings
for non-bovine dairy farms to continually source transitioned animals
(vs. animals under organic management from the last third of gestation)
is small compared to that for bovine dairy farms. For this reason, the
practice of continually adding transitioned animals to organic non-
bovine herds is likely less prevalent than with organic bovine herds.
While a commenter asked for an exemption for goats during the comment
period citing limited availability of organic genetics, there are
avenues to bring in additional genetics through breeding stock. These
operations also make up a relatively small portion of the organic dairy
industry. The Organic Integrity Database \36\ of certified organic
operations includes approximately 56 dairy goat operations and 2 dairy
sheep operations.
---------------------------------------------------------------------------
\36\ Certifying agents are required to send information on
certified operations to AMS annually. Current and historical data
may be accessed through the Organic Integrity Database at the
following link: <a href="https://organic.ams.usda.gov/Integrity/">https://organic.ams.usda.gov/Integrity/</a>. Accessed
11/21/2019.
---------------------------------------------------------------------------
AMS used multiple data sources to describe the baseline and build
quantitative estimates. The first source is the Agricultural Resource
Management Survey (ARMS), which is maintained by USDA's Economic
Research Service (ERS) and includes questions about dairy farm cattle
purchases, restocking rates, and organic status.\37\ In 2016, ERS
conducted a supplemental ARMS that focused on organic dairy operations;
this was the most recent such survey. AMS worked with ERS to analyze
the ARMS data and develop an estimation of organic dairy production
practices and costs for this rule.
---------------------------------------------------------------------------
\37\ The ERS ARMS survey information may be found at the
following link: <a href="http://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-production-practices.aspx">http://www.ers.usda.gov/data-products/arms-farm-financial-and-crop-production-practices.aspx</a>.
---------------------------------------------------------------------------
Other sources of data are the National Agricultural Statistics
Service's (NASS) 2019 Certified Organic Production Survey and 2017
Census of Agriculture,\38\ which include State-level data on
production, herd sizes, output, and sales for organic and non-organic
crops and livestock. Additionally, the Organic Trade Association's
(OTA) 2021 Organic Industry Survey is used to summarize market
information and trends within the organic industry.\39\ Also, AMS
requested an organic dairy farm special tabulation from the National
Animal Health Monitoring System (NAHMS) Dairy 2014 report collected by
USDA's Animal and Plant Health Inspection Service.\40\
---------------------------------------------------------------------------
\38\ The USDA NASS surveys may be found at the following link:
<a href="https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Organic_Production/">https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Organic_Production/</a>.
\39\ OTA/Nutrition Business Journal, 2021 Organic Industry
Survey. Nutrition Business Journal conducted a survey between
January 13 and April 23, 2021, to obtain information for their
estimates. Over 120 organic firms responded to the survey. Available
online at <a href="https://ota.com/resources">https://ota.com/resources</a>.
\40\ The 2014 Dairy NAAHMS report may be found at the following
link: <a href="http://go.usa.gov/xKfEh">http://go.usa.gov/xKfEh</a>.
---------------------------------------------------------------------------
A final source of data is the AMS list of all certified operations
included in the Organic Integrity Database (OID). The organic
regulations require USDA-accredited certifying agents to keep track of
the number of operations they certify in OID (7 CFR
205.501(a)(15)(ii)). AMS consolidates this information into a public,
searchable online database.\41\ AMS used information from this database
to cross-check NASS data on the number of organic dairy operations.
---------------------------------------------------------------------------
\41\ Current and historical data may be accessed through the
Organic Integrity Database at the following link: <a href="https://organic.ams.usda.gov/Integrity/">https://organic.ams.usda.gov/Integrity/</a>.
---------------------------------------------------------------------------
The Organic Dairy Market--Sales and Number of Operations
According to the OTA Industry Survey, U.S. organic food, fiber, and
agricultural product sales were over $61.9 billion in 2020.\42\ Organic
dairy and eggs is the third largest sector in organic retail food sales
(13 percent), after fruits and vegetables (36 percent) and beverages
(14 percent). Sales of organic dairy products, including milk, cream,
yogurt, cheese, butter, cottage cheese, sour cream, and ice cream,
exceeded $7.4 billion in 2020. Table 2 shows the organic dairy market
characteristics by subcategory.
---------------------------------------------------------------------------
\42\ Organic Trade Association (OTA)/Nutrition Business Journal,
2021 Organic Industry Survey (pp. 3).
Table 2--Organic Dairy Market--Retail Sales by Subcategory
----------------------------------------------------------------------------------------------------------------
% of organic
Subcategory 2020 Sales ($ 2020 Growth dairy sales Avg. premium Organic
M) (%) \a\ \b\ (%) premium ($ M)
----------------------------------------------------------------------------------------------------------------
Milk/Cream..................... $3,770 11.1 59.2 68 $1,527
Yogurt \d\..................... 1,310 3.9 20.6 30 304
Cheese \e\..................... 653 14.3 10.3 73 276
Butter/Cottage Cheese/Sour 492 15.8 7.7 72 207
Cream \d\.....................
Ice Cream \e\.................. 142 19.5 2.2 65 56
--------------------------------------------------------------------------------
Total...................... 6,367 10.5 100.0 61 2,370
----------------------------------------------------------------------------------------------------------------
\a\ The Organic Trade Association's 2021 Organic Industry Survey (p. 67) included eggs as a subcategory for its
summary on organic dairy sales, but we have excluded the data on eggs from this table.
\b\ USDA's 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: <a href="https://www.ams.usda.gov/market-news/dairy">https://www.ams.usda.gov/market-news/dairy</a>.
Average prices of product categories are averages across the four periods weighted by store counts. Premiums
are calculated as the: ((Organic Price-Conventional Price)/Conventional Price). Any missing data was
supplemented by the previous weeks prices, if available.
\c\ The dollar value of the organic premium for each category is: (Organic Sales x Premium)/(1 + Premium).
\d\ The yogurt and butter, sour cream and cottage cheese premiums are respectively the average of the premiums
of 32 oz. yogurt products and 1 lb. of butter, weighted by counts of stores advertising organic products.
Cheese premiums are for natural varieties in 8 oz. blocks.
\e\ Price data for organic Ice Cream was only available the first quarter. The premium is calculated with only
this data.
Table 2 also includes premiums (or ``markups'') in the prices of
dairy products marketed as organic versus nonorganic products. For
dairy products, the average organic premium was 61 percent and totaled
nearly $2.4 billion in value.\43\ 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
attributes.
---------------------------------------------------------------------------
\43\ National Retail Report--Conventional vs Organic--<a href="https://usda.library.cornell.edu/concern/publications/000000043?locale=en">https://usda.library.cornell.edu/concern/publications/000000043?locale=en</a>.
---------------------------------------------------------------------------
The 2019 NASS Organic Production Survey estimated that U.S. had
approximately 3,134 certified and exempt organic dairy farms that
milked
[[Page 19760]]
a peak of 363,404 cows in 2019.\44\ These organic dairy farms had milk
sales of nearly $1.6 billion in 2019. Total organic milk production in
the United States increased to 5.1 billion pounds in 2019, representing
a 27 percent increase in production from 2016 and 84 percent increase
since 2011. In that same time frame, the number of certified organic
farms grew 22 percent over 2016 (2,559 farms in 2016) and grew 70
percent compared to 2011 (1,848 farms in 2011). AMS used the 2019 NASS
data for our analysis, as it is consistent with data from the Organic
Integrity Database \45\ and also includes data on the number of organic
dairy cattle maintained by certified operations. The Organic Integrity
Database does not include data on the number of organic animals managed
by organic operations.
---------------------------------------------------------------------------
\44\ USDA NASS. 2017. Census of Agriculture--2019 Certified
Organic Survey. Available online at: <a href="https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Organic_Production/">https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Organic_Production/</a>.
\45\ The Organic Integrity Database is available online at:
<a href="https://organic.ams.usda.gov/Integrity/">https://organic.ams.usda.gov/Integrity/</a>. AMS identifed approximately
3,180 bovine dairy operations in the database, as of January 2020.
---------------------------------------------------------------------------
Organic Dairy Farms--Characteristics and Distribution
Organic dairy farms are, on average, smaller than conventional
dairy farms. NASS's Certified Organic Surveys Agriculture (not
conducted on an annual or regular basis) show that the number of milk
cows owned by organic dairy farms averaged 108 head in 2011, 105 head
in 2016, and 108 head in 2019. In contrast, NASS's Census of
Agriculture (conducted in every five years) 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 2019 NASS Organic Production Survey
showed that each organic cow produces about 14,096 pounds of milk
annually, or 47 pounds per day over a 300-day lactation period. NASS
production data for 2019 shows that across all operations (conventional
and organic) average production is 23,391 pounds of milk per animal
annually, or 78 pounds per day over the same 300-day period.\46\
Despite lower yields, organic dairy farms can be economically viable
through the price markups they receive over conventional milk and milk
products. Table 2 shows that the average premium for organic dairy
products averaged 61 percent at the retail level.
---------------------------------------------------------------------------
\46\ USDA's Milk Production (December 2020) Report available
online at: <a href="https://downloads.usda.library.cornell.edu/usda-esmis/files/h989r321c/q524kf13h/ws85b748b/mkpr1220.pdf">https://downloads.usda.library.cornell.edu/usda-esmis/files/h989r321c/q524kf13h/ws85b748b/mkpr1220.pdf</a>.
---------------------------------------------------------------------------
Based on the 2019 NASS Survey of Organic Production Data, Table 3
shows that the highest concentration of organic dairy farms is in the
Northeast and Upper Midwest regions,\47\ however the 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 64.5 percent of total farms. However, those States represented less
than 25.7 percent of national organic milk production.
---------------------------------------------------------------------------
\47\ USDA's Certified Organic Production Survey available online
at: <a href="https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Organic_Production/">https://www.nass.usda.gov/Surveys/Guide_to_NASS_Surveys/Organic_Production/</a>.
---------------------------------------------------------------------------
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) represented only 5.13 percent
of total certified organic dairy farms, while producing 33.4 percent of
the total organic milk nationally. The survey also indicates
significant regional differences in the average number of milk cows on
dairy farms. For example, California dairies average 372 head per farm,
Texas dairies average 4,647 head per farm, and Wisconsin dairies
average 60 head per farm. ARMS and NAHMS data show similar patterns of
size difference across regions.
Table 3--Top States With Organic Dairy Farms Compared to Production (2019)
----------------------------------------------------------------------------------------------------------------
Percent of U.S.
Number of organic organic dairy Milk production Percent of U.S.
dairy farms farms (pounds) milk production
----------------------------------------------------------------------------------------------------------------
United States....................... 3,134 100 5,122,684,816 100
California...................... 150 4.79 889,290,462 17.36
Texas........................... 9 0.29 821,868,224 16.04
Wisconsin....................... 525 16.75 440,963,146 8.61
Oregon.......................... 40 1.28 321,420,989 6.27
New York........................ 607 19.37 386,732,234 7.55
Pennsylvania.................... 362 11.55 215,797,929 4.21
Vermont......................... 172 5.49 202,401,003 3.95
Washington...................... 45 1.44 136,897,016 2.67
Minnesota....................... 125 3.99 138,891,803 2.71
Ohio............................ 260 8.30 128,388,287 2.51
Idaho........................... 29 0.93 364,524,076 7.12
Indiana......................... 246 7.85 142,678,892 2.79
Michigan........................ 93 2.97 66,684,699 1.30
Iowa............................ 105 3.35 70,705,742 1.38
Maine........................... 88 2.81 61,387,355 1.20
----------------------------------------------------------------------------------------------------------------
The Organic Dairy Market--Replacement Animals
Cull and Mortality Rates
Operations source replacement animals from on- and off-farm sources
to replace animals that are sold to other farms, die, or are
intentionally removed and sold to slaughterhouses (``culled''). The
APHIS NAHMS surveys \48\ in 2007 and 2014 provide data on how many
animals are culled (removed) from U.S. dairies annually and the reasons
for their removal. Most dairy cows were removed for udder problems or
reproductive problems, followed by lameness and poor production.\49\ In
the 2007 APHIS NAHMS survey of dairies, 23.6 percent of all dairy
animals were permanently removed from farms that year (excluding cows
that died) \50\ while the 2014 survey found a corresponding
[[Page 19761]]
annual cow removal rate of 28.4 percent.\51\ The 2014 NAHMS survey
found that 21 percent of adult organic cows were removed from the U.S.
national organic herd that year. These figures include animals that are
sold as replacement females to other dairies. The 2014 survey found a
lower percentage of cows were permanently removed on small and medium
operations (26.0 and 26.3 percent, respectively) than on large
operations (29.7 percent).
---------------------------------------------------------------------------
\48\ USDA APHIS. NAHMS Dairy, 2007, Part I: Reference of Dairy
Cattle Health and Management Practices in the United States, 2007.
This survey included both nonorganic and organic dairy animals.
Available online at: <a href="http://go.usa.gov/xKfEh">http://go.usa.gov/xKfEh</a>.
\49\ USDA APHIS. NAHMS Dairy 2007, 84.
\50\ USDA APHIS. NAHMS Dairy 2007, 87.
\51\ USDA APHIS. NAHMS Dairy 2014, Report I: Dairy Cattle
Management Practices in the United States, 2014. Available online
at: <a href="http://go.usa.gov/xKfEh">http://go.usa.gov/xKfEh</a>, 218.
---------------------------------------------------------------------------
The same surveys provide information about the deaths of animals on
dairies. Overall, annual mortality rates were 7.8 percent for un-weaned
heifers, 1.8 percent for weaned heifers, and 5.7 percent for cows (2007
survey). In 2014, NAHMS identified that about 5 percent of adult
organic dairy cows die on the farm (compared to 21 percent of adult
organic cows that were removed for other reasons). These numbers were
roughly consistent with the 2007 report.
Between culling and mortality, a dairy farm would need to raise or
purchase females that represent about 30 percent (23.6 percent culled
plus 5.7 percent deaths) of the farm's herd size to maintain its size.
As a lactating dairy herd (cattle) typically calves about 50 percent
female offspring each year, the overall dairy herd should have enough
replacement females to replace culled animals and animals that die.
This conclusion considers downward adjustments for mortality (using
2007 NAHMS rates noted above of 7.8 percent and 1.8 percent) and
additional reduction for culling.\52\ The additional (excess)
replacement female animals should allow organic dairy operations to
expand the number of animals in their herds should they wish to expand.
Additionally, producers may choose to breed with sexed semen which will
increase the number of female offspring available to the dairy farm.
---------------------------------------------------------------------------
\52\ As an example, a 100-cow lactating dairy herd would produce
about 50 heifers annually (i.e., 50 percent of births). Considering
this heifer group as a single group, a 7.8 percent mortality rate
would reduce the herd to about 46.1 animals by the end of year one
(assuming a 7.8 percent mortality rate over the entire year).
Additionally, AMS assumes a 10 percent cull rate could further
reduce this to 41.5 animals at the end of year one. By the end of
the second year, this number could be reduced another 1.8 percent
(mortality rate for weaned heifers) to 40.7 animals. Assuming a
further 10 percent reduction due to culls, the original 50-animal
group may be reduced to 36.6 animals by the end of year two.
---------------------------------------------------------------------------
Sourcing Organic Replacement Animals
Most organic dairy farms replace culls and deaths with replacement
heifers that are born and raised on the farm. The 2014 NAHMS data
reports that 96.5 percent of organic replacement heifers are born and
raised on the organic operation. An additional 2.6 percent of the
replacement heifers are born on the operation and are subsequently
raised off the operation before returning to the operation. The
remaining 0.9 percent of replacement females are born off the operation
and are presumably purchased from other operations.
The 2016 ARMS data (again, the most recent survey of this type)
also provides information about how dairies source replacement animals.
Overall, ARMS data indicates that in 2016, the average organic dairy
farm milked 102.7 cows and added 43.0 replacement animals of all types
(cows or heifers of all sizes). Of those replacements, 93.8 percent
(40.35 head) were born on the farm (and owned continuously by it) and
85.1 percent (36.62 head) were both born and raised on the farm. Based
on 2,559 total dairy farms with a total herd size of 267,523 reported
in the Census of Agriculture (2016 data), ARMS data indicates that
110,037 total heifers and milk cows (41.1 percent of the herd) were
added to operations in 2016.\53\ Purchased animals from off-farm
sources included 4,325 milk cows (3.9 percent), 1,953 large heifers
weighing more than 500 pounds (0.73 percent), and 559 small heifers
weighing less than 500 pounds (0.2 percent).
---------------------------------------------------------------------------
\53\ The 2017 ARMS survey indicates that the average organic
herd size is 102.7 head while the 2016 Census of Organic Production
indicates it is 104.5 (= 267,523 head/2,559 farms).
---------------------------------------------------------------------------
Exact data on how many of the purchased replacement heifers are
transitioned heifers and how many are organically managed from the last
third of gestation is not available. For this reason, this RIA
calculates costs for two conjectured values for the share of purchased
replacements that are transitioned heifers. Furthermore, AMS does not
have aggregated data on what approach producers currently use when
purchasing replacement heifers. Therefore, AMS does not have data on
how many producers are bringing heifers into organic production as
nonorganic animals and transitioning them into organic (or purchasing
animals transitioned on other organic operations) versus sourcing and
managing animals as organic from the last third of gestation. Excluding
small heifers (which would not be able to achieve the cost savings of
continuous transitioning), AMS uses the 2016 ARMS survey to estimate
the total number of large replacement heifers purchased (2,460 large
heifers purchased annually) and assumes 25-50% of all large
replacements are transitioned for our cost model based on the OIG
report (Audit Report 01601-0002-32) that half of certifiers allowed the
practice of continuous transitioning.\54\ AMS did not receive comments
providing more accurate estimates or objections to this assumption
during the comment periods for the proposed rule.
---------------------------------------------------------------------------
\54\ The OIG report does not represent a random sample of
operations. No commenter disputed or provided additional data for
this estimate through public comment.
---------------------------------------------------------------------------
AMS notes that, according to the OIG report, not all certifying
agents allow certified operations to continually transition animals.
OIG found in a survey of six certifying agents (among the top ten
certifying agents for dairy operations) that three allowed certified
operations to continually transition animals.
Regulatory Impact Analysis
Comments Received on Costs and Benefits
AMS sought input from the public about the estimated costs and
benefits of this rule. AMS published estimated costs and benefits in
the 2015 proposed rule and published an updated analysis in May 2021.
AMS summarized and responded to these comments below.
Availability of Replacement Animals
In 2015, some comments noted that organic heifer supplies were
tight and that the heifers for sale were not of consistently high
quality. This led commenters to believe the proposed rule could curtail
growth of existing or new operations, restrict milk supply, and raise
consumer prices. Some comments urged AMS to seek a consistent standard
for all operations while considering that operations may need to grow
to meet consumer demand.
A comment in 2015 calculated that a dairy could be expected to
raise only enough of its own heifers to grow at an annual rate of 5
percent, after accounting for morbidity and culling. This commenter
questioned AMS's conclusion there would be an ample supply of organic
heifers under the rule. The commenter estimated that the industry would
take time to catch up with the demand for organic heifers (organically
managed from the last third of gestation).
Other comments in 2015 argued that there was an adequate supply of
organic heifers (organically managed from the last third of gestation)
available or that operations would raise and sell them if the price was
higher and reflected the
[[Page 19762]]
cost of raising them. In 2019, commenters claimed there is a surplus of
organic heifers (organically managed from the last third of gestation)
available to meet market needs and that there is an ample supply of
animals even if morbidity/mortality rates are high or heifer selection
is aggressive. No comments in 2019 or 2021 claimed that organic heifer
supplies were constrained.
AMS response: Based on our analysis of the comments received, AMS
continues to believe that sufficient numbers of organic heifers
(organically managed from the last third of gestation) would be
available after rule implementation to maintain and/or grow existing
organic dairies. To mitigate potential and unforeseen impacts, AMS is
providing a compliance date of ten months beyond the effective date of
this final rule to allow animals in the middle of an approved
transition to complete the transition and produce organic milk. AMS
received many comments that supported this approach during the comment
periods. AMS is also including a variance process for certified
operations that are small businesses, and meet certain other specific
and limited circumstances. These operations may request a variance from
the prohibition on the movement of transitioned animals for specific
and limited situations.
Price of Replacement Animals
A commenter in 2019 disagreed with AMS's estimate of a $1,300 cost
difference between transitioned animals and organic animals
(organically managed from the last third of gestation). The commenter
believed AMS's estimate was too high. The commenter further explained
that its ``discussions with dairy auction sales barns that previously
sold organic cattle do not align with that value'' and the most common
response it received from extension agents in the Northeast was that
``demand and verified sales have all but dried up for organic springing
heifers [heifers close to calving].''
AMS received many comments in 2019 related to the cost difference
for raising heifers organically vs. nonorganically during the first 12
months of life. One commenter found a $469 average cost difference
(organic being more costly) per animal. Most comments noted a cost
difference from $600 to $1,000 per calf, and some comments noted a
difference as high as $1,300 per calf. Commenters tended to use the
difference in production costs to describe the financial disadvantage
and the harm to operations that source only organic animals
(organically managed from the last third of gestation) in comparison to
operations that continually transition heifers to organic production.
In 2021, several commenters reiterated the difference in cost of
raising dairy replacement heifers under organic management versus
conventional management in the first year of life, citing figures from
$623 to $1,300 per calf. A few commenters referred to a study by
Cornell Cooperative Extension that found an average $884 savings per
animal compared to animals raised using organic methods.\55\
---------------------------------------------------------------------------
\55\ Fay Benson. Cornell College of Agriculture and Life
Sciences. ``USDA Puts Northeast Organic Dairies at a Disadvantage.''
Small Farms Quarterly. January 13, 2020. <a href="https://smallfarms.cornell.edu/2020/01/usda-puts-northeast-organic-dairies-at-a-disadvantage/">https://smallfarms.cornell.edu/2020/01/usda-puts-northeast-organic-dairies-at-a-disadvantage/</a>.
---------------------------------------------------------------------------
Commenters in 2015, 2019, and 2021 generally agreed that
implementation of the proposed rule would result in greater demand for
organic heifers and would likely increase the price of organic
replacement animals. Many commenters viewed this scenario favorably, as
it would benefit organic producers who sell organic animals
(organically managed from the last third of gestation), as opposed to
some heifer-raising operations currently selling transitioned animals.
In 2021, one producer commented that in the last decade the market
value of organic replacement dairy cattle (organically managed from
last third of gestation) is $1,100/head (or more) below the cost of
producing them, as the continuous transitioning of non-organic dairy
replacements has flooded the market. Another commenter stated that
market prices are $1,500 to $1,800 per head, a lower value than the
$2,000 or $2,500 value assumed by USDA's analysis.
AMS response: AMS continues to present the costs of the rule as a
range based on different potential scenarios (see Table 5). AMS agrees
with comments that the price of organic heifers may increase, and we
have estimated costs under two scenarios where the price of heifers
increases by $500 and where the price does not increase that are
discussed further in the section on final rule costs. AMS estimates
that the price of an organic heifer (organically managed from the last
third of gestation) is $2,000 and up to $2,500 if increased demand
drives prices upward. This represents a $1,000 to $1,500 premium for
organic animals (organically managed from last third of gestation)
animals over transitioned animals. The estimated difference seems to
agree with comments that production costs for these animals are $600 to
$1,300 higher. AMS recognizes that this price estimate may be high and
thus the result might be considered an upper bound of the estimated
costs.
Effect on Consumer Milk Price
A commenter in 2015 estimated the rule would increase the cost of
producing organic milk by 3.7 to 6.0 cents per half gallon (0.87
percent to 1.42 percent, respectively) and that the increase would be
passed to consumers, thereby negatively affecting consumer demand.
However, AMS also received comments in 2015 from organic milk consumers
that supported the proposed rule even though they expected the rule to
lead to higher milk prices. Other comments noted that if supply of
organic milk were to become very restricted under the new requirements,
retail prices could increase to a point where consumer demand would
flatten or even decrease.
In 2019, stakeholders were more concerned with how consumer milk
prices negatively affect organic dairy producers than how they affect
consumers. Comments frequently discussed the idea that there is an
oversupply of organic milk currently ``flooding the market'' that are
driving consumer prices down. In 2021, commenters were again concerned
about an oversupply of organic milk and the subsequent economic
hardship for organic dairy farmers. Commenters found that a strict and
fair enforcement of the rule would allow for a gradual increase in
organic milk production that would match consumer demand. NOP received
comments regarding concerns about Concentrated Animal Feeding
Operations (CAFOs) producing large quantities of organic milk, with one
commenter noting if transitioning remained, it would only further push
market power to fewer operations in the industry and another stating
their ability to capitalize on transitioning pushed small and mid-sized
operations out of production. Commenters stated that the rule would not
have a significant effect on consumer milk prices but would positively
affect many dairy farmers. One group of dairy farmers reported that 88
operations would be positively impacted by the rule, while only four
would face a negative impact.
AMS response: Table 2 figures indicate that the retail premium of
organic milk products over conventional milk products is 61 percent.
The AMS Dairy Market News for August 9th to 13th, 2021, indicated that
the twelve-month average (farm-level) organic milk pay price was $31.55
per hundredweight while forecasting the 2021 all milk price at $17.95
per
[[Page 19763]]
hundredweight. Together these values indicate that the farm-level
organic markup is 76 percent. The ERS farm share of the retail price
for the milk and dairy basket in 2020 was 30 percent.
Table 5 shows that the total costs of this rule to the organic milk
producers' net of transfers would be $1,845,000 under our 50 percent
transitioning scenario and $922,500 under our 25 percent transitioning
scenario discussed further below. The Census of Organic Agriculture
indicates that farm-level organic milk revenue was $1.585 billion in
2019.\56\ Based on these figures, AMS estimates that a final rule would
increase producer costs by less than 1%.\57\
---------------------------------------------------------------------------
\56\ Because of economic effects due to the pandemic and recency
of data, AMS does not adjust for inflation in our estimates.
\57\ Total industry costs are estimated to be 1.3 billion using
organic dairy enterprise budget from Iowa State University Research
and Extension. Source: <a href="https://www.extension.iastate.edu/dairyteam/content/iowa-dairy-budgets">https://www.extension.iastate.edu/dairyteam/content/iowa-dairy-budgets</a>.
---------------------------------------------------------------------------
Number of Transitioning Animals
One commenter in 2015 estimated there were 60,000 conventional
animals transitioning to organic production on new and established
dairy farms. The commenter predicted this could lead to an oversupply
of milk and decrease in milk price (income for the dairy farm). Another
commenter in 2019 believed that ``tens of thousands'' of animals had
transitioned since 2015.
AMS response: AMS recognizes that we do not have precise data on
how many animals are transitioned on an annual basis by certified
organic operations. Our information, obtained from industry and
certifying agents, indicates that most organic dairy farms do not
continually transition animals. However, because of the lack of precise
numbers available, AMS estimates that transitioned animals comprise 25
percent (low end) to 50 percent (high end) of all purchased replacement
animals. AMS did not receive concrete data from comments to support
alternative figures.
Changes in Dairy Market Since 2015
In 2019, many comments noted that the organic dairy industry had
changed considerably since AMS published the proposed rule in 2015.
Primarily, commenters noted a decline in consumer demand for organic
milk and increased availability of organic milk and organic dairy
cows.\58\ Some comments noted that fewer operations are transitioning
to organic production due to limited opportunities to secure a contract
with a milk handler or because the price premium for organic production
is no longer an incentive to transition. Some 2019 comments noted that
the cost of the rule would be less than AMS estimated in 2015 due to
increased availability of organic replacement animals (organically
managed from last third of gestation) and a corresponding drop in
prices for these animals.
---------------------------------------------------------------------------
\58\ See AMS-NOP-11-0009-2799.
---------------------------------------------------------------------------
AMS response: AMS recognizes that the organic dairy market in 2015
differed from the current organic dairy market. Our calculation of
costs for this rule is higher than those calculated in 2015 because the
cost calculation is based, in part, on the number of organic dairy
operations and total organic herd size. These numbers have both
increased since 2015, so the estimated cost is higher.
AMS also notes that there have been significant changes in the
organic dairy market starting in 2020 that correspond to the start of
the COVID-19 global pandemic. During this time, the demand for organic
products, including organic milk and milk products, increased
dramatically due to changes in consumer behavior such as a shift to at-
home dining (vs. dining out), among other impacts. Organic dairy grew
almost 2% in 2019 and 8% in 2020.\59\ Data on the current trends in
organic replacement heifer markets are limited, but AMS observes
relatively stable prices in the non-organic dairy replacement market
now compared to pre-pandemic period.\60\ The long-term effects of the
pandemic on consumer behavior and the organic dairy market,
specifically, are difficult to predict, though AMS expects the
predicted effects of costs and benefits of our analysis to hold. For
this analysis, AMS used the most current information available to
present our estimated costs and benefits.
---------------------------------------------------------------------------
\59\ Source: Organic Trade Association (OTA), 2021 Organic
Industry Survey.
\60\ Source: AMS Feeder and Replacement Auction Data, <a href="https://www.ams.usda.gov/market-news/feeder-and-replacement-cattle-auctions">https://www.ams.usda.gov/market-news/feeder-and-replacement-cattle-auctions</a>.
---------------------------------------------------------------------------
Costs and Benefits (General)
A commenter in 2019 disagreed with AMS's cost analysis in the
proposed rule. It stated that the cost analysis ``fails to capture the
cost inequities of not implementing the proposed rule,'' and
specifically points to its ``failure to distinguish production costs
between organic and transitioned heifers.'' Without this information,
the commenter argues ``neither the agency nor stakeholders can
understand the true cost, and true harm, of implementing or not
implementing the proposed rule.'' Furthermore, the commenter calculated
the harm to operations that source only organic animals (organically
managed from the last third of gestation) using the difference in
production costs for transitioned animals and organic animals
(organically managed from the last third of gestation). The commenter
estimated that 25 percent or 50 percent of all culled organic dairy
animals are replaced with transitioned animals and calculated
competitive harm of $9.29 million to $18.58 million annually ($469
multiplied by 25 percent to 50 percent of all culled animals using a
cull rate of 28.4 percent).
AMS response: The commenter estimates that the competitive harm
from the current enforcement practice of allowing transitioned animals
is $9.29 million (under the 25 percent scenario) and $18.58 million
(under the 50 percent scenario). These estimates are based on the
commenter's finding that a conventional heifer costs $462 less to raise
and that organic farms require 79,242 replacement heifers annually
(based on a 28.4 percent cull rate and the 2016 organic U.S. herd size
of 279,021 head).
AMS understands the commenter's general concern that organic dairy
farms need to replace a substantial share of cows each year and that
the different application of transition practices by certifiers and
producers creates cost disparities. AMS uses the cost difference for
purchased replacement heifers (transitioned vs. organically managed
from last third of gestation) as its estimate of the per animal
increase in costs for dairy farms that have used transitioned animals.
AMS recognizes that this does not account for increased costs to
operations that might maintain ownership of offspring that are born on-
farm, subsequently removed from organic production, and then
transitioned back into organic production. AMS understands that most
certifiers do not interpret the current regulations to allow this
practice. Any increase in the cost of replacement heifers only applies
to the purchasers of such animals who would otherwise have purchased
transitioned animals. For this reason, AMS believes that applying the
cost differential to replacement heifers that are both purchased and
unpurchased (i.e., owned) would overstate the cost of the rule.
[[Page 19764]]
As described in our consideration of regulatory alternatives below
(see Alternative A), AMS expects that purchases of replacement heifers
that are transitioned animals would increase if AMS allowed this
practice through regulatory action. Additionally, dairy operations
utilizing heifer-raising operations while retaining ownership may
switch to operations that use conventional practices and then
transition the animals to organic production. Table 4 shows that only
11 percent of operations purchase replacement heifers. The uneven
application of the current rule suggests that a smaller share of
producers is benefiting from the cost advantage of transitioned heifers
at a level higher than that suggested by the average number of head
purchased.
Costs of Final Rule
The final rule will likely increase production costs on organic
livestock and dairy operations that currently continually transition
nonorganic animals and/or operations that source transitioned dairy
animals as replacements. Additionally, any dairy that purchases organic
heifers may pay higher prices for organic animals due to increased
demand, but organic operations selling replacement heifers would
benefit from any higher prices.
We assume that farms that exclusively raise their own organic
replacement heifers and manage those animals organically from birth
would not incur additional costs under the final rule. Similarly, dairy
farms that send organic heifer calves to other certified organic
operations to have the animals continuously managed as organic (for
some period of time before returning to the farm) would not incur
additional costs. Finally, nonorganic dairy operations converting to
organic production for the first time would not incur new costs during
the 12-month transition period; they may transition animals on a one-
time basis under the final rule.
Estimated Costs for Dairies
The final rule creates two costs for organic dairy farms. First,
dairy farms that transition heifers or purchase transitioned
replacement heifers after their initial transition to organic would be
required either to purchase higher-cost organic replacement heifers
(organically managed from the last third of gestation) or to raise
their own replacements by raising organic calves to maturity. This
analysis assumes that transitioned animals are sold at a discount
compared to organic replacement animals (organically managed from last
third of gestation).
Second, by raising the demand for organic replacement heifers, the
final rule may raise the price of organic replacement heifers if
operations currently selling organic (transitioned) replacement heifers
cannot comply with the requirements and operations that sell organic
replacement heifers (organically managed from last third of gestation)
cannot easily increase offerings. While this price increase is likely
to be small, it would raise costs to any organic dairy farm that is a
net buyer of organic replacement heifers, regardless of whether it
continually transitions animals or purchases transitioned replacement
heifers. This same price effect, however, would create an offsetting
benefit to any dairy farm that is a net seller of organic replacement
heifers.
AMS investigated the additional costs that could possibly arise due
to limiting the movement of transitioned animals. Under the final rule,
producers are unable to sell their transitioned animals as organic and
must take the conventional price for these animals. This cost is likely
to only impact producers seeking to liquidate their herd. The final
rule does not alter the current regulations that prohibit transitioned
animals from being sold for organic slaughter (therefore would not
receive the organic premium at end of life) and operations can continue
to manage a transitioned animal rather than sell it for a loss in most
cases of continued operation. Only when an operation is forced to sell
their animals at the lower conventional price because of the final rule
would there be any additional cost due to the prohibition of the
movement transitioned. The final rule provides for a variance request
process (Sec. 205.236(d)) that could allow an organic operation to
sell their transitioned animal in certain situations (bankruptcy,
insolvency, intergenerational transfers).
AMS looked at all operations with listed dairy animals that were
suspended or surrendered their organic certification between 2016-2021
and found at most five that could face costs due to limited movement of
transitioned animals.\61\ Between the five operations, they had less
than 300 head in total at the time of exit from the organic market.
While the increased costs possibly faced by these operations would
increase the total cost of the rule, data indicate that all observed
operations would likely have been eligible for the variance and thus
been able to avoid additional costs. Because no operations would have
faced additional costs due to the prohibition on the movement of
transitioned animals between 2016-2021, AMS did not include this as an
additional cost in the final analysis.
---------------------------------------------------------------------------
\61\ Using the Organic Integrity Database, AMS identified dairy
cattle operations with listed organic animals that were suspended or
surrendered their organic dairy certification between 2016-2021.
---------------------------------------------------------------------------
AMS estimates the costs of the final rule by estimating the total
number of replacement animals purchased by U.S. organic dairy cattle
operations annually. AMS then estimates the percentage of all purchased
animals that do not meet the requirements of the final rule (i.e., the
percentage of animals bought by organic operations that are not
organically managed from the last third of gestation). Due to the
unavailability of precise data, AMS estimated a range of possibilities
(25 percent to 50 percent of all purchased animals). AMS received no
public comments that provided a more accurate estimate. To calculate
costs, AMS then multiplied the number of animals by the price
difference between organic (organically managed from last third of
gestation) and nonorganic heifers (we use nonorganic heifer prices as a
substitute for transitioned animals in the absence of that data).
Finally, AMS considered a possible increase for the price of
organically managed from the last third of gestation heifers to
calculate the maximum expected costs. The data and calculations are
discussed in detail below.
The ARMS survey includes farm-level data on purchases and sales of
heifers weighing more than 500 pounds, a category that explicitly
includes sales of springers.\62\ While the ARMS survey does not
identify whether purchased heifers have been organic from birth or have
transitioned to organic status, it does identify whether the farms
themselves are certified or transitioning to organic status. Since all
cattle sold by organic dairies are themselves organic and all cattle
sold by non-organic dairies are conventional, this analysis assumes
that the difference in the large heifer sales prices for organic or
transitioning farms and other farms reflects the difference in costs
for those animals. This analysis estimates costs under the alternative
assumptions that either 25 or 50 percent of all purchased heifers are
transitioned heifers.
---------------------------------------------------------------------------
\62\ A springer is a heifer (i.e., a female cow that has not
previously calved) that is 7 to 9 months pregnant and will begin
producing milk within 0 to 2 months.
---------------------------------------------------------------------------
AMS used 2016 ARMS data to estimate the number of replacement
animals purchased by organic
[[Page 19765]]
operations. (This survey is conducted every 5 years, so these are the
most recent numbers available at the time of this writing.) Table 4
provides the average numbers and prices of large heifers bought and
sold by organic or transitioning farms, divided into four different
size categories, along with figures for all organic or transitioning
farms and all other non-organic farms. Compared with their non-organic
counterparts, organic and transitioning dairy farms are more likely to
purchase large heifers as replacements, and sell a smaller share of
their large heifers. On average, organic dairies purchased replacement
large heifers at a rate of 0.73 percent of their total herd size (or
0.75 head) and sold large replacement heifers at a rate of 1.27 percent
of their total herd size. However, only 10.9 percent
[…truncated; see source link]Indexed from Federal Register on April 5, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.