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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>Revise Karnal Bunt Regulated Areas in Arizona, California, and Texas</h1>
<h1>Docket Number 09-079-01</h1>
<h2>U.S. Department of Agriculture
</h2>
<h2>Animal and Plant Health Inspection Service
</h2>
<h2>April 2010
</h2>
<h1>Summary
</h1>
<p>This rule adds to the Karnal bunt quarantine areas in Maricopa County, AZ, and removes from the quarantine areas in La Paz County, Maricopa County, and Pinal County, AZ; Riverside County, CA; and Throckmorton County and Young County, TX.  The net effect of the rule will be positive, reducing the regulated areas in the five counties by a total of 45,896 acres.  Wheat grain grown in regulated areas can be moved to non-regulated areas only if it has tested negative for bunted kernels.  Movement of commercial wheat seed grown in regulated areas to non-regulated areas is prohibited.  </p>
<p>Wheat producers affected by this interim rule are likely to be small in size, based on Small Business Administration size standards.  Furthermore, the 2007 Census of Agriculture data indicate that about one-fourth of the wheat farms in the five counties qualified as small family farms, less than 3 percent were limited resource farms, and less than 3 percent had operators who belong to socially disadvantaged groups.  We do not know the number of wheat operations located in the areas regulated or deregulated by this rule, let alone the number of those operations that qualify as small family farms, limited resource farms, or as having operators who belong to socially disadvantaged groups.  We do not expect general impacts of the rule to differ among these various categories of wheat producers or to differ from effects overall for wheat producers in these areas.</p>
<p>While the overall impact of the rule will be positive, the effects are not expected to be significant.  The testing of grain for Karnal bunt is performed free of charge for producers in regulated areas; elimination (or imposition) of the testing requirement is a matter of convenience, not a financial issue.  Second, little or no commercial wheat seed is, or is expected to be, grown in the newly regulated areas.  Third, for producers in their first regulated crop season, any negative price effects will be mitigated by compensation for losses.  In subsequent regulated crop seasons, producers will incorporate the risk of KB infestation into their planting decisions.  For these reasons, we do not expect the interim rule to have a significant economic impact on a substantial number of small entities.</p>
<h1>Introduction 
</h1>
<p>This analysis provides the basis, as required by the Regulatory Flexibility Act, 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.  Karnal bunt (KB) is a fungal disease of wheat, durum wheat, and triticale (a hybrid of wheat and rye).  Upon detection of KB in Arizona in March 1996, Federal quarantine and emergency actions were imposed to prevent the interstate spread of the disease to other wheat-producing areas in the United States.
  The quarantine remains in effect, although it has since been modified, both in terms of its physical boundaries and in terms of its restrictions on the production and movement of regulated articles.
</p>
<p class="default_Text">
Under APHIS’ rules, wheat planting (grain or seed) is allowed in regulated areas.  Wheat grain can be moved from regulated areas if it tests negative for bunted kernels.  However, commercial wheat seed grown in regulated areas cannot be moved outside those areas.  Furthermore, before it can be planted in a regulated area, commercial wheat seed that originates within a regulated area must be tested and found free of both bunted kernels and spores.  
</p>
<p class="default_Text">
By this rule, fields are being deregulated after the completion of a 2009 KB survey that found them to be free of the disease.  Other fields are being regulated due to bunted wheat kernel found during the 2009 survey or because they are within the 3-mile wide buffer zone around fields or areas affected with KB.  Specifically, this rule adds an area in Maricopa County, AZ (4,553 acres) to the Karnal bunt quarantine.  Areas removed from the quarantine are in La Paz County, Maricopa County, and Pinal County, AZ (5,094, 13,237, and 76 acres, respectively); in Riverside County, CA (14,287 acres); and in Throckmorton County and Young County, TX (5,919 and 11,836 acres, respectively).</p>
<p class="default_Text">
The overall effect of the rule is the reduction in the size of the KB regulated acreage by 45,896 acres.  In Arizona, the regulated acreage will decrease by 13,854 acres; in California, by 14,287 acres; and in Texas, by 17,755 acres.  With this rule, there will be no remaining Karnal bunt quarantine areas in Texas.   
</p>
<p class="default_Text">Potential Impact on Small Entities</p>
<p class="default_Text">
The Regulatory Flexibility Act requires that agencies consider the economic effects of their rules on small businesses, organizations, and governmental jurisdictions.  The entities most likely to be affected by this interim rule are wheat producers whose fields have been added to the list of regulated areas, as well as producers whose fields have been removed from the list of regulated areas and who plan to grow wheat in the future.  The number of such producers is not known because data are available only by county.  </p>
<p class="default_Text">
Producers affected by this interim rule are likely to be small in size, based on the Small Business Administration (SBA) size standard for wheat farmers and data from the 2007 Census of Agriculture, which is the most recent census available.  The SBA classifies wheat producers with total annual sales of not more than $750,000 as small entities.  According to 2007 Census data, there were a total of 15,637 farms in Arizona (of which 201 were wheat farms).  Of the total number of farms in Arizona, 96 percent had annual sales of less than $500,000, well below the SBA's small-entity threshold of $750,000 for wheat farms.  Similarly, the percentage of farms with annual sales of less than $500,000 in California was 89 percent (81,033 total farms, of which 1,188 were wheat farms) and 98 percent in Texas (247,000 total farms, of which 8,372 were wheat farms).
  We presume that the percentages of operations that are small in the newly regulated and deregulated areas are similar to State-wide percentages.</p>
<p>While most if not all wheat farms affected by this rule are small, we do not expect the economic impacts to be significant.  Producers whose fields are being deregulated will benefit because they will be able to move wheat without restriction.  Prior to the rule change, any wheat grain grown in those fields could be moved to non-regulated areas only if it tested negative for bunted kernels, and any commercial wheat seed grown in those fields could not be moved at all to non-regulated areas.  Conversely, producers whose fields are being regulated will be adversely affected because of the movement restrictions.
</p>
<p>However, the rule’s impact on individual producers is not likely to be significant.  The testing of grain for KB is performed free of charge for producers in regulated areas.  Elimination (or imposition) of the testing requirement is a matter of producers’ need and convenience only, not a financial issue.  Second, little or no commercial wheat seed is, or is expected to be, grown in the newly regulated fields.  
</p>
<p>  The elimination (or imposition) of restrictions will increase (or restrict) marketing opportunities for producers, with impacts on prices received by individual producers.  Those producers in Arizona, California and Texas whose fields are deregulated may enjoy increased market opportunities for any wheat they grow in the future (e.g., the availability of export markets) and receive a potentially higher commodity price.  Alternatively, those producers in Arizona whose fields are newly regulated may see the market for their wheat become more limited and receive a discounted price.  For producers in their first regulated crop season, any negative price-received effects will be mitigated by compensation for losses.  Therefore, the net effect on producer revenues in the newly regulated areas is not likely to be significant.  In subsequent regulated crop seasons, producers will incorporate the risk of KB infestation into their planting decisions.  All in all, this rule change will not have a significant economic impact on a substantial number of small entities.</p>
<p class="default_Text">Data from the 2007 Census of Agriculture allow us to further consider the relative prevalence of certain categories of wheat farms in the five counties affected by this rule.  These operations are small family farms, limited resource farms, and farms for which one or more of the operators belong to specified socially disadvantaged groups.
  Although this rule affects only portions of the five counties, as before, the 2007 Census data are for each county in its entirety.  Statistics for Pinal County are not included in this discussion, given the very small size of the area removed from quarantine (76 acres).</p>
<p>Beginning with the overall prevalence of wheat farms in the five counties, only about 3 percent of all farms (201 out of 6,425 operations) harvested wheat.  However, the prevalence by county ranged widely, with one-fourth of farms in Throckmorton County, TX, having harvested wheat, to one-half percent of farms in Riverside County, CA.
</p>
<p>Of the 201 farms in the five counties that harvested wheat, about one-fourth (49 operations) were small family farms.  Forty-five of these 49 farms were located in the two Texas counties, 20 in Throckmorton County and 25 in Young County.  There were no small family farms in La Paz County, AZ, or in Riverside County, CA, that harvested wheat.  Five of the 201 farms that harvested wheat were classified as limited resource farms, one in Maricopa County, AZ, and two each in Throckmorton County and Young County, TX.
</p>
<p>A farm is reported as operated by a member of a socially disadvantaged group if the principal operator is a woman or if any of the top-three operators belongs to one of the ethnic or racial categories indicated in footnote 3.  In the five counties, farms that harvested wheat and had operators belonging to socially disadvantaged groups were less prevalent than were farms in general that had operators belonging to these groups.  For example, about 24 percent of all farms in the five counties had a woman as the principal operator, whereas only 5.5 percent of wheat farms had a woman as the principal operator.  Wheat farms for which a woman was a principal operator comprised 0.2 percent of all farms in the five counties (11 of 6,425 farms).  
</p>
<p>Similarly, over 13 percent of all farms in the five counties compared to 4 percent of wheat farms had a person of Spanish, Latino, or Hispanic origin as a top-three operator.  The wheat farms for which a person of Spanish, Latino, or Hispanic origin was one of the top-three operators comprised 0.1 percent of all farms in the five counties (8 of 6,425 farms).  There were four wheat farms in the five counties for which one of the top-three operators was an American Indian or Alaskan Native, compared to 216 such farms overall.  None of the wheat farms in the five counties had as one of its top-three operators an Asian, African American, or Native Hawaiian or other Pacific Islander, compared to 304 farms overall that had a top-three operator belonging to one of these groups.  This last statistic is skewed by the 221 farms in Riverside County, CA, for which one of the top-three operators was an Asian.
</p>
<p>In sum, as a share of all wheat farms  in the five counties, ones that were operated by members of socially disadvantaged groups comprised less than 12 percent, ones that qualified as limited resource farms were less than 3 percent, and about one-fourth were operations that qualified as small family farms.  Forty-five of the 49 wheat operations in the five counties that were small family farms were located in the two Texas counties.  The available data do not allow us to determine whether the rule is likely to have disproportional effects on wheat farms in the areas being regulated or deregulated that are small family farms, limited resource farms, or that have operators who belong to socially disadvantaged groups.  Impacts are expected to be generally much the same, benefiting producers in areas deregulated and adversely affecting producers in areas newly regulated.  As stated above, while the overall impact will be positive (more acres, by far, deregulated than newly regulated), the rule is not expected to have a significant economic effect on a substantial number of small entities.      </p>
<p>� The spread of the disease in the United States would have significant adverse economic consequences, since many U.S. wheat export markets require that wheat from the United States be from areas where KB is not known to occur.  By certifying that U.S. wheat is from such areas, APHIS facilitates exports to some markets that otherwise would likely be closed.  
</p>
<p>� Source: SBA and 2007 Census of Agriculture.  
</p>
<p>� USDA, ERS. Structure and Finances of U.S. Family Farms: Family Farm Report, 2007 edition, EIB-24.
</p>
<p>Any farm where the operator and persons related to the operator own a majority of the business is considered a family farm.  Small family farms have annual gross sales of less than $250,000.  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.  By definition, limited resource farms qualify as small family farms, but they are identified as a separate category in this discussion; limited resource aquaculture farms are excluded from the enumeration of small family farms.  Socially disadvantaged operators are members of groups that historically have been subjected to bias and prejudice.  The categories are women; persons of Spanish, Hispanic, or Latino origin; American Indian or Alaska Native; Asian; Black or African American; and Native Hawaiian or other Pacific Islander.  These farm operators, themselves, may not have experienced bias or prejudice, but identify with one or more of these gender, ethnic, and racial groups.
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