Analysis in Support of Certification that the Rule will not have a Significant Economic Impact on a Substantial Number of Small Entities Interim Rule: Tuberculosis; Amend 9 CFR 77 by Moving Six C ounties in Michigan (Antrim, Charlevoix, Cheboygan, Crawford, Emmet , and Otsego) from Modified Accredited Status to Modified Accredited Advanced Status

Docket No. APHIS
- 2009
- 0 0 46

Jul y 200 9
Policy Analysis & Development Policy & Program Development Animal & Plant Health Inspection Service U.S. Department of Agriculture2 Michigan currently has split State status for bovine tuberculosis (TB), with an Accredited Free (AF) zone, a Modified Accredited Advanced (MAA) zone , and a Modified Accredited (MA) zone. This rule will reclassify six counties in the State (Antrim, Charlevoix, Cheboygan, Crawford, Emm et, and Otsego) from MA status to MAA status
. MA status imposes various requirements for TB testing of cattle

. Reclassification to MAA status reduces or remove s some of those testing requirements. The Regulatory Flexibility

Act (RFA) of 1980 (Public L aw 96

- 354) requires agencies to evaluate the potential effects of proposed and final rules on small businesses, small organizations, and small governmental jurisdictions. Section 605 of the RFA allows an agency to certify that a rule will not have a significant economic impact on a substantial number of small entities. Following is the factual basis for such certification in this case. Description and Estimate of Small Entities Affected b y the Interim Rule Entities that will be directly aff ected by the rule are owners of cattle i n six Michigan counties . Reclassification of these counties from MA to MAA status reduces some TB testing requirements. Operations in these counties will benefit from reduced costs associated with TB testing. The cattle industry

play s an important role in Michigan ’s econom y. There were 14,454 cattle and calf operations in Michigan in 200 7 with a total inventory of 1.05 million head. 1 State

- wide cash receipts f rom cattle and calve s and dairy products totaled $343 million and $1 .5 billion, respectivel y, in 2007. Eight

- ye ar average cash receipts for cattle and c alves and dairy products (2000

- 2007) were $262 million and $952 million, respectivel y. 2

1 2007 Census of Agriculture. National Agriculture Statistics Service, USDA. 2 USDA/ERS Cash Receipts, by Commodity Groups and Selected Commodities, United States and States, 2000

- 2007
. http://www.ers.usda.gov/Data/farmincome/FinfidmuXls.htm3 The Small Bus iness Administration (SBA) has established guidelines for determining which businesses are considered small. According to SBA size standards for beef cattle ranchin g and farming (NAICS 112111) and for dairy cattle and milk production (NAICS 112120), operations with not more than $750,000 in annual sales are considered small entities. For cattle feedlots (NAICS 112112), operations with not more than $2.5 million in annual sales are considered small entities. The vast majority of beef operations in Michigan are considered small, as well as most dairy operations

. In200 7 more than 98 percent of cattle and calf farms generated less than $500,0 00 in cash receipts and less than 1 percent generated $1 million or more. About 67 percent of dairy farms generated less than $500, 0 00 in cash receipts and about 15 percent generated $1 million or more. More than 99 percent of cattle feedlots were considered small in 2007. 3 The composition of Michigan ’s catt le inventory is shown in table 1

. TABLE 1. Michigan Cattle Inventory, January 1, 200 9 Type Number Percentage of Total Beef cows 92 ,000 8.6 % Milk cows 353 ,000 33.0 % Heifers Beef cow replacements 27 ,000 2.5 %

Milk cow replacements 148 ,000 13.8 % Other heifers 5 0,000 4.7 % Total heifers 225 ,000 21.0 % Steers 185 ,000 17.3 % Bulls 15 ,000 1.4 % Calves 200 ,000 18.7 % TOTAL 1,070 ,000 Source: National Agriculture Statistics Service, USDA. Expected Effects of the Rule Michigan currently h as three TB status zones: an AF, a MAA and a MA zone

. This rule w ill reclassify six counties from MA to MAA

. The elevation of an area to

3 2007 Census of Agriculture. National Agriculture Statistics Service, USDA.4

MAA status from MA status removes certain TB testing requirements on cattle owners. The MA restrictions include a negative TB test within 60 day s of the interstate mov ement of cattle and bison from a herd without accredited status , except for cattle moving direct ly to slaughter

. The restrictions also include a whole herd test within one y ear for intact cattle moving interstate from a herd without accredited status, unless the cattle are moving to an approved feedlot or direct ly to slaughter. I n addition, dairy herds in a MA zone are required to have an annual whole herd test in order to comply with the Pasteurized Milk Ordinance (PMO). 4 With one exception, the preceding testing requ irement s do not apply to catt le moving out of a MAA zone. Intact cattle from a herd without accredited status moving interstate, not direct ly to slaughter, are still required to have a negative TB test within 60 day s of interstate mov ement. Cattle herd ow ners in the six counties being upgraded to MAA status will see a reduction in TB testing requirements as a result of this rule, and will therefore benefit from reduced costs associated with that TB testing. In2008 , there were 538 beef, dairy , or mixed cattle herds in the six affected counties, with about 18,400 cattle. About 620 cattle are in 14 accredited herds

. There were also 32 cattle feedlots in those counties with about 700 cattle. The cattle in these counties account for about 2 percent o f the cattle in Michigan

. 5 A negative TB test within 60 day s of interstate movement of cattle for feed ing will no longer be necessary for non - accredited herds in the six counties covered b y this rule based on MAA status . Tuberculosis testing, including veteri nary fees, costs about

4 U.S. Food and Drug Administration, Center for Fo od Safety and Applied Nutrition. 5 2007 Michigan Agricultural Statistics , USDA /NASS, Michigan Department of Agriculture; Michigan TB annual report, 2008.5

$10 to $15 per head. 6 The State of Michigan estimates that about 8,650 cattle moved interstate for feeding from the six counties were subject to this rule in 2008. Based on the above range in testing costs per animal, we expect annual cost savings associated with reduced testing of feeder cattle moving interstate from these six counties to total between $ 86,500 and $ 129,750
. The more a herd owner in the affected counties engages in the interstate mov ement of feeding cattle, the gre ater will be the savings associated with the reduction in movement restrictions

. Owners of non

- accredited herds in the MAA zone engaged in interstate movement of breeding cattle also will benefit from reduced costs associated with TB testing. A negative whole herd test within 12 months of the interstate movement of intact cattle from a herd without accredited status will no longer be needed for herds in the MAA zone. I n addition, the annual whole herd test for dairies required under the PMO for herds in a MA zone is not required for herds in a MAA zone. A whole herd test requires the testing of all animals in a herd that are 12 months of age or older at the time of the test. In 2008 , beef and mixed beef in the six counties covered in this rule had an average o f 25 head . Dairy herds had an average of 183 head

. With TB testing costs of $10 to $15 per head, annual whole herd testing cost s average between $250 and $375 per beef and mixed herd and between $1,830 and $2,745 per dairy herd . These cost esti mates per herd may be high because the cost of whole herd testing on a per

- animal basis is generall y less than the cost of testing animals individually , and it assumes that all animals in the average herd are at least 12 months of age .

6 USDA/APHIS/VS, personal communication.6 The State of Michi gan has estimated that there are 493 non

- accredited beef and mixed herds in the six counties covered in this rule. Based on the above estimate s of the average cost of a whole herd test, and a ssuming that all of the non

- accredited beef and mixed herds move cattle interstate, the annual cost savings associated with the removal of this whole herd testing requirement could total between $123,250 (493 herds, multiplied by $250 per herd) and $184,875 (493 herds, multiplied by $375 per herd). The State of Michigan ha s estimated that there are 31 commercial dairies operating in the six counties . These dairies will no longer be required to perform an annual whole herd test under the PMO. Based on the above estimate s of the average cost of a whole herd test, the annual cost savings for dairy herds of the removal of the whole herd testing requirement could total between $ 56,730 (31 herds multiplied by $1,830 per herd) and $85,095 (31 herds, multiplied by $2,475 per herd). C attle herd owners in the six counties cove red in this rule will see a reduction in TB testing requirements as a result of this rule, and will therefore benefit from reduced costs associated with that TB testing. However, the six counties covered in this rule
accoun t for less than 4 percent of cat tle operations and less than 2 percent of the cattle in the State of Michigan. In addition, TB testing costs are small when compared to the value of the cattle tested, and the expected savings therefore are also relatively small. On January 1, 2008 , beef cattle in Michigan had an average per animal value of $ 1,330
. 7 The average value of dairy

cattle is considerably

higher , given the value of milk produced. The savings in TB test ing costs represent no more than about 1. 1 percent of the average per - head v alue of beef cattle in Michigan ($15 / $1,330 ) and an even smaller percentage

7 Meat Animals Production, Distribution and Income Final Est imates 2003

- 2007 . May 2009. NASS, USDA. Statistical Bulletin Number 1026. http://usda.mannlib.cornell.edu/usda/nass/SB995/sb1026.pdf7

of the average value of dairy cattle in the State

. This rule will not have a significant economic impact on a substantial number of small entities. Conclusion Michigan curren tly

has three TB status zones: an AF, a MAA and a MA zone. This rule will reclassify

six counties from MA to MAA. The elevation of an area to MAA status from MA status removes certain interstate movement and whole herd TB testing requirements. Cattle o wn ers will benefit from time savings and reduced costs associated with TB testing. The annual cost savings to all producers could be between $266, 000 and $ 400,000
. However, the six counties covered in this rule account for less than 4 percent of cattle ope rations and less than 2 percent of the cattle in the State of Michigan

. In addition, TB testing costs are about one percent or less of the value of the cattle tested . T hus , the expected savings will be relatively small

. This rule will not have a signifi cant economic impact on a substantial number of small entities.