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<body><h1>Analysis in Support of Certification that the Rule will not have a Significant Economic Impact on a Substantial Number of Small Entities</h1>
<h1>Interim Rule</h1>
<h1>Brucellosis Class Free States and Certified Brucellosis-Free Herds; Revisions to Testing and Certification Requirements</h1>
<h1>09-083-1</h1>
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<h2>U.S. Department of Agriculture</h2>
<h2>Animal and Plant Health Inspection Service</h2>
<h2>April 2010</h2>
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<h1>Summary</h1>
<p>This analysis provides the basis, as required by the Regulatory Flexibility Act, for certification by the APHIS Administrator that this interim rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.  The rule modifies the brucellosis regulations to reduce the amount of testing required to maintain Class Free status for States that have been Class Free for five or more years and have no <u>Brucella</u> <u>abortus</u> in wildlife.  It also removes the provision for automatic reclassification from Class Free to Class A if two or more herds are found to have brucellosis within a two-year period or if a single brucellosis-affected herd is not depopulated within 60 days.  These changes remove restrictions that are no longer necessary due to the low prevalence and risk of spread of brucellosis in the United States, especially in areas of the United States with no <u>B</u>. <u>abortus</u> in wildlife.</p>
<p>Although the cattle industry in the United States is becoming increasingly concentrated, the cattle industry is still characterized by numerous farms with a few cattle or calves.  Most beef cattle and dairy operations are well below the Small Business Administration’s small-entity standard of $750,000 or less in annual receipts.  In 2007, almost 89 percent of all cattle operations were family farms, but only 19 percent were classified as small family farms and less than 14 percent were considered limited resource farms.  </p>
<p>The Greater Yellowstone Area (GYA) is a region of known risk of brucellosis in wildlife.  In 2007, almost 29 percent of the cattle operations in the GYA were classified as small family farms.  Less than 12 percent of those farms were considered limited resource farms.  Nearly a third of the cattle operations in Montana (35.5 percent) and Wyoming (31.3 percent) were considered to be small family farms and about 16 percent of all farms with cattle and calf inventories in the GYA had one or more operators belonging to certain socially disadvantaged groups.  While the percentage of cattle operations with a woman as the principal operator or a Hispanic person as one of the top-three operators constituted a small proportion of total cattle operations in the GYA, the two categories comprised a large share of the GYA farms for which one or more operators belonged to a socially disadvantaged group.  </p>
<p>All operations, both large and small, are subject to the same requirements for testing and would benefit from the reduction in testing requirements.  In the longer term, we expect there to be potential benefits and costs for small entities attributable to the rule, depending on an operator’s interstate sales of sexually intact cattle, whether the operator chooses to certify his or her herd as brucellosis-free, and circumstances resulting from brucellosis occurrences.  One potential benefit of the rule for small entities will derive from States and areas no longer being subject to automatic reclassification from Class Free to Class A status if two or more herds are found to have brucellosis within a two-year period.  </p>
<p>APHIS does not expect the interim rule to have a significant economic impact on a substantial number of small entities or to significantly affect operators located within designated brucellosis surveillance areas.</p>
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<p>Introduction</p>
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<p>This analysis provides the basis, as required by the Regulatory Flexibility Act, for certification by the APHIS Administrator that this interim rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.  The rule modifies the brucellosis regulations to reduce the amount of testing required to maintain Class Free status for States that have been Class Free for five or more years and have no <u>Brucella</u> <u>abortus</u> in wildlife.  It also removes the provision for automatic reclassification from Class Free to Class A if two or more herds are found to have brucellosis within a two-year period or if a single brucellosis-affected herd is not depopulated within 60 days.  These changes remove restrictions that are no longer necessary due to the low prevalence and risk of spread of brucellosis in the United States, especially in areas of the United States with no <u>B</u>. <u>abortus</u> in wildlife.</p>
<p>The interim rule adds a provision requiring Class Free States with <u>B</u>. <u>abortus</u> in wildlife to develop and implement a brucellosis management plan to control and prevent the spread of brucellosis within and from designated brucellosis management areas.  This change will better focus resources for managing <u>B. abortus</u> in domestic livestock and wildlife and will provide risk mitigation assurances for the interstate movement of cattle.  Also, the age at which cattle are included in herd blood tests is being reduced to ensure that brucellosis can be detected in younger animals.  Finally, the rule adds an alternative testing protocol for herd certification which provides more flexibility to the herd certification process.</p>
<p>	The interim rule removes brucellosis surveillance redundancies.  Twice-yearly brucellosis ring testing for dairy herds will no longer be required in States that have been Class Free for five or more years and do not have <u>B. abortus</u> in wildlife.  For these same States, collection of blood samples at slaughter will be based on a national slaughter survey of the top 40 slaughterhouses, which is expected to cover 95 percent of the test-eligible slaughter cattle while reducing the total number of cattle tested by approximately 50 percent.[footnoteRef:1]  These changes in surveillance activities will result in Federal and State cost savings; private entities are not charged for the brucellosis ring test or the test at slaughter. [1:  Based on information from Debra A. Donch, National Brucellosis Epidemiologist & Program Manager, USDA-APHIS, Washington, DC.] 
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<p>Cattle Industry</p>
<p>The total cash value of the U.S. cattle inventory exceeded $89 billion in 2007 and the average value per head of cattle sold in the United States was $922.[footnoteRef:2]  (Unless otherwise indicated, all statistics that follow are for 2007.)   Over 33 million head (27.5 million steer and heifers and 6.3 million cull beef and dairy cows) were processed for commercial slaughter.[footnoteRef:3] [2:  USDA-NASS, Agricultural Prices 2007 Summary. Washington, D.C.: National Agricultural Statistics Service, Agricultural Statistics Board, Pr 1-3 (08) a, P.68, July 2008.]  [3:  USDA-NASS, Farms, Land in Farms, and Livestock Operations 2008 Summary. National Agricultural Statistics Service, revised 2007 estimate, p. 14, February 2009. ] 
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<p>There were 1,571 organic beef and 1,617 organic dairy operations with more than $471 million in total organic product sales in 2008.  Most organic beef operations are relatively small in comparison to conventional operations.  Organic milk production has been one of the fastest growing segments of organic agriculture in the United States.  Economic incentives, driven largely by lower production costs, have pushed organic dairies to adapt their operations to be more like conventional dairies in terms of size, location, and the types of technologies used.[footnoteRef:4]   [4:  McBride, W.D., and C. Greene. Characteristics, Costs, and Issues for Organic Dairy Farming, ERR-82, U.S. Department of Agriculture, Economic Research Service, 2009.] 
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<p>The cattle industry is becoming increasingly concentrated.  Lower profit margins and increased competition have resulted in an overall drive for improved efficiency.  More than 50 percent of the total value of U.S. sales of cattle and calves comes from five States: Texas, Kansas, Nebraska, Iowa, and Colorado.  Of the 766,350 beef cow operations, approximately 35,000 farms (5 percent) produced around 75 percent of the total value of U.S. sales of cattle and calves.[footnoteRef:5]   Beef cow operations market to about 2,100 feedlots that, in turn, market to four major beef packers.[footnoteRef:6]  According to the National Agricultural Statistics Service (NASS), over 55 percent of the cattle were slaughtered at the 14 largest slaughter plants.  [5:  USDA-NASS, 2007 Census of Agriculture: Cattle Production. Washington, D.C.: National Agricultural Statistics Service.]  [6:  Harlan Hughes. The Changing Market Structure for the American Beef Industry. Journal of Animal Science. 2002. 80:1-24.] 
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<p>The Regulatory Flexibility Act requires agencies to consider whether a rule will “have a significant economic impact on a substantial number of small entities.”[footnoteRef:7]  The Small Business Administration’s (SBA) small-entity standard both for Beef Cattle Ranching and Farming and Dairy Cattle and Milk Production is $750,000 or less in annual receipts.[footnoteRef:8]  According to the 2007 Census of Agriculture, average annual sales for beef cattle and dairy operations were about $100,396 and $456,517, respectively, well below the SBA standard.   [7:  SBA-Office of Advocacy, A Guide for Government Agencies: How to Comply with the Regulatory Flexibility Act. Washington DC, U.S. Small Business Administration, p. 8, September 2009.]  [8:  Table of Size Standards based on NAICS 2002 [Beef Cattle Ranching and Farming: NAICS code 111211] and [Dairy Cattle and Milk Production: NAICS code 112021].  Washington, D.C.: U.S. Small Business Administration, effective October 1, 2007.] 
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<p>Small Entities</p>
<p>Despite the increasing concentration within the cattle industry, farms and ranches specializing in beef cattle were the most common type of all agricultural operations in the United States, accounting for 31 percent of all operations and 21 percent, by value, of all agricultural products sold in the United States.[footnoteRef:9]  Of the 963,669 farms with cattle and calf inventories, about 766,350 were classified as beef cow operations.  Overall, the cattle industry in the United States is characterized by numerous farms with a few cattle or calves.   The average beef cow herd has about 40 head.  About 50 percent of the total cattle inventory in the United States is managed by cattle operations with herds of 100 or fewer head.  Only about 45 percent of cattle producers listed farming as their primary occupation and 77 percent derived less than 25 percent of their income from farming.[footnoteRef:10] [9:  USDA-NASS, Census of Agriculture, 2007.  Washington, D.C.: National Agricultural Statistics Service.]  [10:  USDA-NASS, 2007 Census of Agriculture: Cattle Production. Washington, D.C.: National Agricultural Statistics Service.] 
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<p>	Small family operations, defined by USDA as family farms with gross sales of less than $250,000, are at the lower end of SBA’s small-entity standard.[footnoteRef:11]  These farms are further divided into two subcategories: operations with lower sales (gross sales less than $100,000) and operations with higher sales (gross sales between $100,000 and $249,999).  Based on the 2007 Census of Agriculture, family farms made up almost 89 percent of all cattle operations, but only 19 percent were classified as small family farms.  Thirteen percent of the family farms were in the lower sales category, while 6 percent were in the higher sales group (table 1). [11:  Any farm where the operator and persons related to the operator own a majority of the business is considered a family farm.  The National Commission on Small Operations selected $250,000 in gross sales as the upper boundary for small operations.  USDA, ERS. Structure and Finances of U.S. Family Operations: Family Farm Report, 2007 edition, EIB-24.] 
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<p> Limited resource farms have (a) direct or indirect gross farm sales of not more than $100,000, and (b) a total household income at or below the national poverty level for a family of four, or less than 50 percent of county median household income.[footnoteRef:12]  Consequently, limited resource operations also fall within SBA’s small-entity standard.  Limited resource farms and small family farms were enumerated separately in the 2007 Census of Agriculture.  Nearly 14 percent of cattle and calf operations in the United States were considered limited resource farms (table 1). [12:  Ibid.] 
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<p>Greater Yellowstone Area</p>
<p>The 2007 Census of Agriculture allows a closer examination of small entities in the three States (Idaho, Montana, and Wyoming) that contain the Greater Yellowstone Area (GYA).  The GYA has a known risk of brucellosis in wildlife.  About 43 percent of the farms in the GYA States have cattle and calf inventories.  Almost 29 percent of these cattle operations were classified as small family farms, and 11.6 percent were considered limited resource farms (table 1).   Nearly a third of the cattle operations in Montana (35.5 percent) and Wyoming (31.3 percent) were considered small family farms.</p>
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<table><tbody><tr>	<td><p><b>Table 1 – Limited Resource and Small Family Farms with Cattle and Calf Inventories in the GYA States and the United States, 2007</b></p>
</td></tr>
<tr>	<td><p><b>GYA States</b></p>
</td>	<td><p><b>Total Farms with Cattle and Calf Inventories</b></p>
</td>	<td><p><b>Limited Resource Farms</b></p>
</td>	<td><p><b>Small Family Farms</b></p>
</td>	<td><p><b>Small Family Farms with Lower Sales</b></p>
</td>	<td><p><b>Small Family Farms with Higher Sales</b></p>
</td></tr>
<tr>	<td><p></p>
</td>	<td><p><i>Number</i></p>
</td>	<td><p><i>---Percent---</i></p>
</td></tr>
<tr>	<td><p><b>Idaho</b></p>
</td>	<td><p>10,621</p>
</td>	<td><p>13.3</p>
</td>	<td><p>19.6</p>
</td>	<td><p>13.6</p>
</td>	<td><p>5.9</p>
</td></tr>
<tr>	<td><p><b>Montana</b></p>
</td>	<td><p>12,341</p>
</td>	<td><p>11.1</p>
</td>	<td><p>35.5</p>
</td>	<td><p>19.9</p>
</td>	<td><p>15.6</p>
</td></tr>
<tr>	<td><p><b>Wyoming</b></p>
</td>	<td><p>5,625</p>
</td>	<td><p>9.8</p>
</td>	<td><p>31.3</p>
</td>	<td><p>19.1</p>
</td>	<td><p>12.3</p>
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<tr>	<td><p><b>Total</b></p>
</td>	<td><p>28,587</p>
</td>	<td><p>11.6</p>
</td>	<td><p>28.8</p>
</td>	<td><p>17.4</p>
</td>	<td><p>11.3</p>
</td></tr>
<tr>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
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<tr>	<td><p><b>U.S.</b></p>
</td>	<td><p>963,669</p>
</td>	<td><p>13.8</p>
</td>	<td><p>19.0</p>
</td>	<td><p>13.2</p>
</td>	<td><p>5.8</p>
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<tr>	<td><p><b>Source: </b>Information provided by USDA-NASS, Census of Agriculture, 2007.  Washington, D.C.: National Agricultural Statistics Service</p>
<p>Note: Small Family Farms with Lower or Higher Sales may not sum to total Small Family Farms due to rounding.</p>
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<p>Only about 16 percent of all farms with cattle and calf inventories in the GYA States were classified as having an operator who belongs to a socially disadvantaged group (table 2).[footnoteRef:13]  While the percentage of cattle operations with a female principal operator or a Hispanic person as one of the top-three operators constituted a small proportion of total cattle operations in the GYA, the two categories comprised a large share of GYA farms operated by someone belonging to a socially disadvantaged group.  In addition, over 93 percent of all farms in the GYA States with female principal operators, over 83 percent of farms with Hispanic operators, and over 87 percent of farms with American Indian operators had farm sales below $100,000, which is one of the criteria for classification as a limited resource farm (table 3).  Most if not all operators who belong to socially disadvantaged groups are also small farmers.   [13:  Socially disadvantaged farmers are defined as belonging to a group whose members may have been subject to racial, ethnic, or gender prejudices because of their group identity.  The groups are women, African Americans, Native Americans, Alaskan Natives, Hispanics, Asians, and Pacific Islanders.] 
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<table><tbody><tr>	<td><p><b>Table 2 – Percentage of Farms with Cattle and Calf Inventories having a Woman as the Principal Operator or a Hispanic  Person among the top-three Operators, GYA States and the United States, 2007</b></p>
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<tr>	<td><p><b>GYA States</b></p>
</td>	<td><p><b>Total Farms with Cattle and Calf Inventories</b></p>
</td>	<td><p><b>Farms having One or More  Operators who belong to Socially Disadvantaged Groups</b></p>
</td>	<td><p><b>Farms with a Female Principal Operator </b></p>
</td>	<td><p><b>Of Farms having One or More  Operators who belong to Socially Disadvantaged Groups, Farms with a Female Principal Operator</b></p>
</td>	<td><p><b>Farms with a Spanish, Hispanic, or Latino Operator</b></p>
</td>	<td><p><b>Of Farms having One or More  Operators who belong to Socially Disadvantaged Groups, Farms with a Spanish, Hispanic, or Latino Operator</b></p>
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</td>	<td><p><i>Number</i></p>
</td>	<td><p><i>---Percent---</i></p>
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<tr>	<td><p><b>Idaho</b></p>
</td>	<td><p>10,621</p>
</td>	<td><p>14.1</p>
</td>	<td><p>9.1</p>
</td>	<td><p>64.9</p>
</td>	<td><p>3.7</p>
</td>	<td><p>26.1</p>
</td></tr>
<tr>	<td><p><b>Montana</b></p>
</td>	<td><p>12,341</p>
</td>	<td><p>17.6</p>
</td>	<td><p>9.9</p>
</td>	<td><p>56.2</p>
</td>	<td><p>1.1</p>
</td>	<td><p>6.4</p>
</td></tr>
<tr>	<td><p><b>Wyoming</b></p>
</td>	<td><p>5,625</p>
</td>	<td><p>16.0</p>
</td>	<td><p>11.4</p>
</td>	<td><p>71.6</p>
</td>	<td><p>2.0</p>
</td>	<td><p>12.3</p>
</td></tr>
<tr>	<td><p><b>Total</b></p>
</td>	<td><p>28,587</p>
</td>	<td><p>16.0</p>
</td>	<td><p>9.9</p>
</td>	<td><p>62.1</p>
</td>	<td><p>2.2</p>
</td>	<td><p>14.0</p>
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<tr>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
</td>	<td><p></p>
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<tr>	<td><p><b>U.S.</b></p>
</td>	<td><p>963,669</p>
</td>	<td><p>16.7</p>
</td>	<td><p>9.8</p>
</td>	<td><p>58.7</p>
</td>	<td><p>3.0</p>
</td>	<td><p>17.9</p>
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<tr>	<td><p><b>Source: </b>Information provided by USDA-NASS, Census of Agriculture, 2007.  Washington, D.C.: National Agricultural Statistics Service</p>
<p>Note:  Farms having operators who belong to socially disadvantaged groups may be counted more than once.  For example, a farm that has a woman as the principal operator and a Hispanic person as one of the top-three operators would be included in both categories in this table.</p>
</td></tr>
</tbody></table>
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<table><tbody><tr>	<td><p><b>Table 3 – Value of Sales for Farms in the GYA States with a Female Principal Operator, Hispanic Operator, or American Indian Operator, 2007</b></p>
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<tr>	<td><p><b>Farms by value of sales</b></p>
</td>	<td><p><b>Female Principal Operator</b></p>
</td>	<td><p><b>Spanish, Hispanic, or Latino Operator</b></p>
</td>	<td><p><b>American Indian Operator</b></p>
</td></tr>
<tr>	<td><p></p>
</td>	<td><p><i>---Percent---</i></p>
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<tr>	<td><p>Less than $1,000</p>
</td>	<td><p>47.9</p>
</td>	<td><p>30.3</p>
</td>	<td><p>38.5</p>
</td></tr>
<tr>	<td><p>$1,000 to $2,499</p>
</td>	<td><p>9.5</p>
</td>	<td><p>11.3</p>
</td>	<td><p>7.5</p>
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<tr>	<td><p>$2,500 to $4,999</p>
</td>	<td><p>8.6</p>
</td>	<td><p>9.4</p>
</td>	<td><p>7.0</p>
</td></tr>
<tr>	<td><p>$5,000 to $9,999</p>
</td>	<td><p>8.6</p>
</td>	<td><p>10.5</p>
</td>	<td><p>7.8</p>
</td></tr>
<tr>	<td><p>$10,000 to $49,999</p>
</td>	<td><p>14.5</p>
</td>	<td><p>16.3</p>
</td>	<td><p>19.1</p>
</td></tr>
<tr>	<td><p>$50,000 to $99,999</p>
</td>	<td><p>4.4</p>
</td>	<td><p>5.9</p>
</td>	<td><p>10.0</p>
</td></tr>
<tr>	<td><p>$100,000 to $249,999</p>
</td>	<td><p>4.3</p>
</td>	<td><p>5.5</p>
</td>	<td><p>8.9</p>
</td></tr>
<tr>	<td><p>$250,000 to $499,999</p>
</td>	<td><p>1.3</p>
</td>	<td><p>3.9</p>
</td>	<td><p>1.9</p>
</td></tr>
<tr>	<td><p>$500,000 or more</p>
</td>	<td><p>1.0</p>
</td>	<td><p>6.9</p>
</td>	<td><p>1.3</p>
</td></tr>
<tr>	<td><p><b>Source: </b>Information provided by USDA-NASS, Census of Agriculture, 2007.  Washington, D.C.: National Agricultural Statistics Service</p>
<p>Note:  Totals may not sum to 100 percent due to rounding.  For the Hispanic and American Indian classifications, farms are included if an individual belonging to these groups is among a farm’s top-three operators.  </p>
</td></tr>
</tbody></table>
<p></p>
<p>Impact</p>
<p>Given their respective structures, the interim rule should not have a significant economic impact on the cattle and dairy industries.  All operations, large and small, are subject to the same requirements for testing and would benefit from the reduction in testing requirements.  The interim rule is not expected to have an immediate, significant economic impact on small entities.  In the longer term, we expect there to be potential benefits and costs for small entities attributable to the rule, depending on an operator’s interstate sales of sexually intact cattle, whether the operator chooses to certify his or her herd as brucellosis-free, and circumstances resulting from brucellosis occurrences.</p>
<p>On the cost side, the interim rule will require that producers test all sexually intact animals over six months of age for brucellosis-free whole herd certification. At present, beef cattle under 24 months of age and dairy cattle under 20 months of age are excluded from whole herd testing.  Herd certification is not a Federal requirement, but some operators certify their herds as brucellosis-free for certain marketing advantages.  Given that all States are now Class Free, testing for herd certification is not prevalent and extending certification testing to include the younger cattle is not expected to have a large impact.  The additional cost of testing the younger cattle will be voluntarily borne by a relatively small number of entities.  </p>
<p>A major potential benefit of the rule for small entities will derive from States and areas no longer being subject to automatic reclassification from Class Free to Class A status if two or more herds are found to have brucellosis within a two-year period.  Rather, the affected herds will be quarantined and animals from the herd subjected to strict movement controls.[footnoteRef:14]  Producers in the rest of the State whose herds are not affected by brucellosis will be able to continue to market their animals under Class Free status and not bear the cost of testing sexually intact cattle for interstate movement.[footnoteRef:15]  Affected herds will not need to be depopulated in order for a State to maintain its Class Free status.  Once the herd is under quarantine, the operator can test the cattle for brucellosis and remove ones that test positive until it is determined that the herd is no longer infected. [14:  The APHIS Administrator may downgrade a State or area’s status if continued detections of brucellosis-affected herds indicate an increased risk of disease spread.]  [15:  The manner and extent to which this interim rule may influence testing requirements of States receiving sexually intact cattle from Class Free States that have quarantined herds is not known.    ] 
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<p>Dairy producers who wish to certify their herds as brucellosis-free will benefit from changes that provide greater flexibility.  Other milk tests approved by the Administrator will be allowed to be used in place of the brucellosis ring test.  Also, to maintain certification, the regulations require that dairy herds test negative to a herd blood test within a certain period of time following the initial certification.  As an alternative, the rule will allow dairy herds to maintain certification through negative results to a series of four brucellosis ring tests, or through another testing protocol if the Administrator finds that the protocol is adequate to determine there is no evidence of brucellosis in the herd.  Again, these benefits of the rule will be realized by the relatively small number of dairy producers who decide to certify their herds as brucellosis-free.</p>
<p>The creation of designated surveillance areas in Class Free States with <u>B</u>. <u>abortus</u> in wildlife is not expected to substantially change ongoing brucellosis management activities in these States.  APHIS does not expect the interim rule to significantly affect operators located within designated brucellosis surveillance areas, given the additional resources already directed to brucellosis management activities in the GYA.  As at present, the costs of heightened surveillance will be paid using Federal and State funds.  </p>
<p>Under these circumstances, the Administrator of the Animal and Plant Health Inspection Service has determined that this action would not have a significant economic impact on a substantial number of small entities.</p>
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