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<p>United States Department of Agriculture</p>
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<p>Animal and Plant Health Inspection Service</p>
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<p>September 2010</p>
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<h1 class="title">Analysis in Support of Certification that the Rule will not have a Significant Economic Impact on a Substantial Number of Small Entities</h1>
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<h1 class="title">Interim Rule </h1>
<h1 class="title">APHIS 10-097-1</h1>
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<h1 class="title">Advance the Bovine Tuberculosis Status in Two Zones within the State of Minnesota </h1>
<h1 class="title">(7 CFR part 77) </h1>
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<p>Policy & Program Development</p>
<p>Policy Analysis & Development</p>
<h1><a name="_Toc272329332"></a>Summary</h1>
<p>This interim rule will advance the bovine tuberculosis (TB) status for cattle and bison in both zones identified within the State of Minnesota.  Specifically, the rule will advance the modified accredited advanced (MAA) zone to accredited free (AF) status, and the modified accredited (MA) zone will advance to MAA status.  Advancing the status of these zones will reduce the interstate movement restrictions for cattle and bison originating from Minnesota.    Herd owners will benefit from time savings and reduced costs associated with TB testing.  However, the cost savings will be relatively small.  TB testing costs are small relative to the value of the cattle, and relatively few producers—less than one percent of all cattle producers in the State—will be affected.  Total annual cost savings to producers are likely to be under $200,000.</p>
<p>The reclassified AF zone will include about 99 percent of all cattle herds in the State.  The elevation of an area from MAA to AF status eliminates all remaining interstate movement restrictions for cattle and bison originating from this zone.  However, testing requirements for MAA zones have already been suspended under a Federal Order issued in April 2010.</p>
<p>The reclassified MAA zone will include 267 cattle herds, 17 of which are dairy herds. The elevation to MAA status from MA status removes both individual animal and whole herd testing requirements for producers within this zone.  TB testing, including veterinary fees, costs about $10 to $15 per head.  Based on state-wide estimates of interstate movement, annual cost savings associated with reduced testing of feeder cattle moving out of State from this zone could total between $10,000 and $15,000.  Annual cost savings associated with the removal of whole herd testing for non-accredited beef herds engaged in interstate movement of breeding cattle and for all dairy herds in this zone could be between about $120,000 and $180,000.</p>
<p>The interim rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.</p>
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<p>Table of Contents
Summary	i
Introduction	1
Description and Estimate of Small Entities Affected by the Interim Rule	1
Potential Impacts of the Interim Rule	2
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<p><a name="_Toc238895386"></a><a name="_Toc238895453"></a>
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<p>i</p>
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<p>iii</p>
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<h1><a name="_Toc272329333"></a>Introduction</h1>
<p>This interim rule will advance the bovine tuberculosis (TB) status for cattle and bison in both zones identified within the State of Minnesota.  Specifically, the rule will advance the modified accredited advanced (MAA) zone to accredited free (AF) status, and the modified accredited (MA) zone will advance to MAA status.  </p>
<p>The Regulatory Flexibility Act of 1980 (Public Law 96-354) requires agencies to evaluate the potential effects of proposed and final rules on small businesses, small organizations, and small governmental jurisdictions.  This analysis provides the factual basis for certification by the APHIS Administrator that the interim rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.</p>
<h1><a name="_Toc272329334"></a>Description and Estimate of Small Entities Affected by the Interim Rule</h1>
<p><a name="_Toc268078685"></a>Entities that will be directly affected by the rule are some Minnesota beef and dairy farms that engage in interstate movement of certain types of cattle.  Operations in the MAA zone will benefit from reduced costs associated with TB testing.  </p>
<p>The cattle industry plays an important role in Minnesota’s economy.  There were about 25,000 farms with cattle and calves in Minnesota in 2007, with a total inventory of 2.4 million head.[footnoteRef:1]  State-wide cash receipts from cattle and calves and dairy products averaged $944 million and $1.2 billion, respectively on an annual basis over the period 2000-2006.[footnoteRef:2]   [1:  USDA National Agricultural Statistics Service - Quick Stats, Accessed, 9-9-10.  2007 is the latest year for which data on number of farms with cattle in the State are available.]  [2:  USDA/ERS Farm Income: Annual Cash Receipts, 1924-2006; Table 5 – Cash Receipts, by Commodity groups and selected commodities, Minnesota, 2000-2006.] 
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<p>The Small Business Administration (SBA) has established guidelines for determining which businesses are considered small.  According to SBA size standards for beef cattle ranching 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.  In 2007, nearly 98 percent of U.S. beef ranching and farming operations generated less than $500,000 in cash receipts and less than one percent generated $1 million or more.  About 84 percent of dairy farms generated less than $500,000 in cash receipts and about 6 percent generated $1 million or more.[footnoteRef:3]  Clearly, the majority of Minnesota’s cattle operations are small entities.  The composition of Minnesota’s cattle inventory in January 2010 is shown in table 1. [3:  2007 Census of Agriculture. National Agriculture Statistics Service, USDA. ] 
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<table><tbody><tr>	<td><p>TABLE 1.  Minnesota Cattle Inventory, January 1, 2010</p>
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<tr>	<td><p>Type</p>
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</td>	<td><p>Number</p>
</td>	<td><p>Percentage of Total</p>
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<tr>	<td><p>Beef cows</p>
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</td>	<td><p>380,000</p>
</td>	<td><p>15.70%</p>
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<tr>	<td><p>Milk cows</p>
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</td>	<td><p>470,000</p>
</td>	<td><p>19.42%</p>
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<tr>	<td><p>Heifers</p>
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</td>	<td><p> </p>
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</td>	<td><p>Beef cow replacements</p>
</td>	<td><p>95,000</p>
</td>	<td><p>3.93%</p>
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</td>	<td><p>Milk cow replacements</p>
</td>	<td><p>295,000</p>
</td>	<td><p>12.19%</p>
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</td>	<td><p>Other heifers</p>
</td>	<td><p>180,000</p>
</td>	<td><p>7.44%</p>
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<tr>	<td><p>Total heifers</p>
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</td>	<td><p>570,000</p>
</td>	<td><p>23.55%</p>
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<tr>	<td><p>Steers</p>
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</td>	<td><p>445,000</p>
</td>	<td><p>18.39%</p>
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<tr>	<td><p>Bulls</p>
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</td>	<td><p>35,000</p>
</td>	<td><p>1.45%</p>
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<tr>	<td><p>Calves</p>
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</td>	<td><p>520,000</p>
</td>	<td><p>21.49%</p>
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<tr>	<td><p><i>TOTAL</i></p>
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</td>	<td><p><i>2,420,000</i></p>
</td>	<td><p><i> </i></p>
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<h1><a name="_Toc272329335"></a>Potential Impacts of the Interim Rule</h1>
<p>This interim rule will reclassify the majority of the State as AF and a small geographic area in the northwest portion of the State as MAA.  Advancing the status of these zones will reduce the interstate movement restrictions for cattle and bison originating from Minnesota.  </p>
<p>The reclassified AF zone will include about 99 percent of all cattle herds in the State.  The elevation of an area from MAA to AF status eliminates all remaining interstate movement restrictions for cattle and bison originating from this zone.  The primary restriction for MAA zones is a negative TB test within 60 days of the interstate movement of sexually intact cattle and bison from a herd without accredited status.  However, this testing requirement was suspended under a Federal Order issued in April 2010.</p>
<p>The reclassified MAA zone will include 267 cattle herds, 17 of which are dairy herds. The elevation of an area to MAA status from MA status removes certain interstate movement restrictions for feeding and breeding cattle.  The MA restrictions eliminated by advancement include a negative TB test within 60 days of the interstate movement of steers and spayed heifers that are being moved for feeding purposes or intact heifers going to an approved feedlot.  The MA restrictions also include a negative whole herd test within 12 months of the interstate movement of intact cattle from a herd without accredited status.  An additional TB test is still required if the movement takes place more than 60 days after the whole herd test. <b> </b>Also, because the Federal Order suspended testing restrictions for MAA zones, the advancement from MA to MAA also eliminates the need for a negative TB test within 60 days of the interstate movement of sexually intact cattle and bison from a herd without accredited status.  In addition, dairy herds in a MAA zone are not required to have an annual whole herd test in order to comply with the Pasteurized Milk Ordinance (PMO),[footnoteRef:4] whereas a whole herd test is required of dairy herds in a MA zone.   [4:  U.S. Food and Drug Administration, Center for Food Safety and Applied Nutrition.] 
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<p>A negative TB test within 60 days of interstate movement of feeding cattle will no longer be needed for herds in the MAA zone.  Tuberculosis testing, including veterinary fees, costs about $10 to $15 per head.[footnoteRef:5]  The proposed MAA zone currently does not have any cattle feeding operations, so most of the animals destined for feeding are moved farther south in Minnesota or out-of-state for finishing.  If State-wide statistics hold for the proposed MAA zone, then about 1,000 cattle from this zone move interstate annually.[footnoteRef:6]   Based on the above range in testing costs per animal, annual cost savings associated with reduced testing of feeder cattle moving out of the State could total between $10,000 and $15,000.   [5:  USDA/APHIS/VS, personal communication.]  [6:  According to the Minnesota Board of Health, about 10% of all beef cattle in Minnesota moved interstate in 2007.  ] 
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<p>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.  There are only two TB Accredited Free cattle herds in the proposed MAA zone.  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. </p>
<p>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.  On average, there are 39 animals per beef herd and 100 animals per dairy herd over 12 months of age in the proposed MAA zone.  Annual whole herd testing costs therefore average between $390 and $585 per beef herd, and between $1,000 and $1,500 per dairy herd based on TB testing costs of $10 to $15 per head.  These cost estimates per herd may be high because the cost of whole herd testing on a per-animal basis is generally less than the cost of testing animals individually.  </p>
<p>Based on the above estimate of the average cost of a whole herd test for beef herds, and assuming that all 265 non-accredited beef herds in the proposed MAA zone will be affected, the annual cost savings associated with the removal of the whole herd testing requirement for beef herds could total between $103,350 (265 herds, multiplied by $390 per herd) and $155,025 (265 herds, multiplied by $585 per herd).  </p>
<p>  The State of Minnesota has identified 17 commercial dairies operating in the proposed MAA zone.  These dairies will no longer be required to perform an annual whole herd test under the PMO.  Based on the above estimate of the average cost of a whole herd test for dairy herds, the annual cost savings associated with the removal of the whole herd testing requirement for dairies could be between $17,000 (17 herds, multiplied by $1,000 per herd) and $25,500 (17 herds, multiplied by $1,500 per herd).    </p>
<p>Advancing the statuses of these zones will reduce the interstate movement restrictions for cattle and bison originating from Minnesota.  Herd owners will benefit from time savings and reduced costs associated with TB testing.  However, the cost savings will be relatively small.  TB testing costs are small relative to the value of the cattle, and relatively few producers will be affected.  Affected producers account for less than one percent of all cattle producers in the State and total annual cost savings to those producers are likely to be under $200,000.  Therefore, the interim rule, if promulgated, will not have a significant economic impact on a substantial number of small entities.</p>
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