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By Kathie Arnold, Chair of the NODPA Policy Committee and past NODPA president, and Ed Maltby, NODPA Executive Director
The long running saga of the OOL regulation continues on its predicted path. On May 12 2021, the National Organic Program (NOP) published the reopening of comment on its April 28, 2015, proposed rule to amend the origin of livestock requirements for dairy animals under the USDA organic regulations. There is a 60 day comment period which takes us to July 12, 2021.
Taking into account the summer hiatus, we will be incredibly lucky to receive a Final Rule in 2021. This request for comment is targeting specific areas of the Proposed Rule that the Trump administration was afraid would not stand up to legal challenge or could not be successfully implemented.
Over the nearly two decades of attempting to reach a Final Rule on the issue of transitioning non-organically certified dairy bovine animals to organic production, organic dairy producers have suffered economic harm and the NOP organic seal has had its integrity questioned by certifiers, consumers, and Inspector Generals. As the organic dairy industry has grown, the inconsistency of implementing this exception has increased but the compromise solutions to passing a Final Rule with the support of the organic community have found greater acceptance. There is only one way to close all the loopholes and that is by allowing no transition allowance for conventional livestock to become organically certified. However, not allowing the one-time transition exemption is politically and administratively not possible at this time. NOP believes that it can enforce a one-time exemption that “maintains market stability while simultaneously preserving the value of the organic label” (2021 reopening of comment). Viewed from the supply side of the organic dairy market and the experience producers had in 2015-2016, NOP's analysis is biased towards the processors, marketers and retailers. It will take an aggressive approach by NOP and certifying agents to make the proposed compromise work to the benefit of all stakeholders in organic dairy.
We have accepted that there is no support from the NOP, Congress, and the organic community to open OFPA (the law authorizing the NOP) and do away with the one-time exemption. Therefore, we are providing the following analysis. We hope to educate and provide some background for anyone who wants to comment on the Proposed Rule. The NOP asked for comment on various issues they see as important. We have addressed most of those below.
1. NOP seeks views on “whether the final rule should prohibit organic dairy operations from acquiring transitioned animals to expand or replace animals to produce organic milk”. We unequivocally say yes, transitioned animals can only produce organic milk on the operation they were transitioned on. . We strongly advise that transitioned animals lose their organic dairy status if they are sold, transferred, gifted, moved to another operation, or they are included as part of a merger of their certified entity with other organic livestock where ownership remains with the original certified entity but there is common management of many different certified entities.
Allowing transitioned animals to be sold as certified organic creates a loophole that will be exploited. Transitioned animals are, technically, not organic. A transitioned animal is certified to produce organic milk under an exemption to the regulations that is imposed only on organic dairy (for example, there is no transition exemption to convert non-organic meat animals to organic). They cannot be sold for organic slaughter, and should not be allowed to be sold as an organic dairy animal. If culled from the herd, a transitioned animal should be sold into the conventional market, whether it is a dairy or a beef market. There will be no decrease in the asset value to the owner as the original value of the livestock was as a conventional animal and the owner has recouped any expense incurred in transitioning to organic certification through the price differential received for organic milk produced. Some justifications for this position are below:
2. Record keeping, auditing, and verification of animal identification will be essential. NOP needs to recognize and utilize the updated technology now being used by organic dairy farmers to track their individual animals and require standardized forms for transfer/sale of animals so that each animal has its own ‘passport.’ Uniform and consistent implementation of this requirement is necessary if NOP is to meet its goal as stated in their reopening of comments 2021 justification for continuing the onetime exemption, “that certifiers will be able to enforce a rule that allows for a limited and well-defined transition.”
Recordkeeping is currently not well defined, except by reference to other parts of the rule and this area needs more clarity in a final rule. There is the question about communication between different certifiers about the past history of producers, and the need for some degree of uniformity in certificates of organic certification, especially important for organically certified auctions. The fact that a transitioned animal and any progeny fed third-year transitional crops can never be sold as organic beef, nor as organic dairy stock, will need specific attention in any record-keeping and on-farm accountability.
NODPA’s understanding is that there are certifiers who still don't require animal lists for dairy stock to be submitted at least annually. This must change. To be assured of compliance, there needs to be close tracking and scrutiny of all animals on a certified dairy operation. Without a definitive and required paper trail that is verified by direct observation and auditing of a set percentage of animals, there is far too much opportunity for fraud as animals can easily be moved in and out of a herd. This requirement for direct observation is no different than spot testing and auditing now being required of inspectors verifying a percentage of invoices and available pasture to confirm pasture records.
The following are needed as requirements for organic livestock records. High risk, large herds will have all animals tagged electronically and be relatively easy to track and verify. Smaller operations will be easy to track by walking through the barn after milking or during winter confinement. NOP needs to require certifiers to inspect detailed animal lists from all dairy operations. From those lists they will randomly choose animals that they want to inspect through a direct observation to verify the accuracy of the record. For each animal, the list must include:
Ensuing auditing of the randomly chosen animals must include verification that each animal's dam is/was in the herd for farm raised animals, verification that the date of birth is in the dam's record, auditing of a percentage of mature cow's progeny to cross verify integrity of the herd, and full documentation for any animals stated as purchased (including the individual cow's “passport” mentioned above). If certifiers don't have the ability to satisfy these requirements and provide follow-through, they should not be accredited to certify dairy operations.
The above suggestions follow the NOSB instruction on recordkeeping approved by the NOP July 22, 2011:
5.2 Organic Livestock Producer Records:
1. Origin of Livestock Records
a. Breeding, birthing, and weaning records (e.g. calendar, chart, notebook, veterinary documents)
b. Invoices, receiving records, and organic certification verification for all purchased animals
3. Increased data on organic dairy
The NOP admitted it had difficulty finding the information it needed for its economic justification of the benefits of its proposed regulation and the economic effect of various alternatives. In admitting that there is a shortage of up-to-date, non-propriety data, the NOP reflected the challenge every producer has in determining the size, competitiveness and economic sustainability of the organic dairy market for their own dairy. The dairy industry has great depth of data that is collected by USDA AMS and the Federal Milk Marketing Orders (FMMO). Processors are required to report very detailed information on the milk they receive and how it is utilized and packaged on a monthly basis. It is important for producers to know how much milk is used in retail products, manufacturing, or diverted at a lower price into the conventional market. The FMMO’s have that data but only one Order is publishing it on a monthly basis, FMMO 1. When organic dairy was only one or two percent of total milk production, the data was insignificant. Now it is judged to be as high as six percent of total milk production and expanding its market where conventional milk sales are contracting and dependent on exports.
The USDA’s Organic Production Market and Data Initiatives (ODI) collects information vital to maintaining stable markets, creating risk management tools, tracking production trends, and increasing exports. But it is neither comprehensive nor complete. Waiting for the organic census to publish its data from self-reporting operations is not good enough for a market as large and growing as organic dairy. We support the expansion of reporting of real time data on organic dairy and the cooperation between all agencies within USDA, principally the Federal Milk Marketing Orders, USDA ERS and USDA AMS, to provide producers with an accurate and independent assessment of the market. Since there is no Federal Milk Pricing within Organic Dairy, producers have to sign individual contracts with milk buyers and need detailed independent information to arrive at a sustainable pay price with buyers in what is an increasing monopsony supply side market.
With the expansion of the organic database, there is no reason why certifiers cannot include the number of organic dairy producers, the average yields of milk for each operation and the number of milking cows and heifers in their annual reporting to the NOP.
4. Operation or producer: The NOP is asking for comment on “whether AMS should use the term “operation” to describe the regulated entity, rather than “producer.”
If NOP reads its own comments in the 2015 Proposed Rule, it will be able to answer some of its own questions. This question is wider than organic dairy and has implications for all certified entities.
The regulatory language in terms defined (§ 205.2 Terms defined), has no definition for certified entity. Perhaps there should be one. NOP needs to standardize what legal structure they want for a certified operation as defined in 'Terms defined'. A 'Producer' under Term defined, includes the classification of a 'Person”. Under Terms defined, a Person is “An individual, partnership, corporation, association, cooperative, or other entity.” For many, the farming operation is a dba under a sole proprietor's social security number or under an LLC, Corporation, or partnership using a TIN or EIN number. Many individuals and business entities have many production, distribution, and branding ‘partnerships’ under dba’s. Within the regulation, the term producer and operation are used in different contexts and at times seem interchangeable.
Certified operation under terms defined is “Certified operation. A crop or livestock production, wild-crop harvesting or handling operation, or portion of such operation that is certified by an accredited certifying agent as utilizing a system of organic production or handling as described by the Act and the regulations in this part.”
NODPA has long proposed that a producer with an established conventional herd can use the one-time exemption to transition their whole herd in order to maintain the genetics and inbred immunities that the herd has developed but only if the owner(s) have not held more than 10% ownership share of an organic operation that has already used the one-time exemption. The regulations also define a person as an ‘individual, partnership, corporation, association, cooperative or other entity’ (section 205.2).” While we understand that the intent of tying the transition exemption to an operation is to prevent organic dairies from transitioning multiple herds, NODPA believes that the intent would be more directly and effectively accomplished by tying the transition to the “responsibly connected person(s).” In accordance with the “responsibly connected person” approach, any person who is a partner, officer, director, holder, or owner of 10 percent or more of an applicant or a recipient of certification would only be allowed a one-time herd transition exemption.. An exemption regulated in this manner would stop new start-ups that consisted of or included responsibly connected persons who had already used the one-time exemption, thus ending the ability to transition multiple conventional herds to organic. Conversely, attaching the exemption to an operation, as recommended by NOP, would allow any newly certified entity (however configured) to be eligible for the one-time transition of a conventional dairy herd each time a business arrangement was reconfigured, which could include persons with a 10% or more ownership stake in another operation that had already used the one time exemption. Continuing to allow the one time exemption to be used by the same person(s) to transition under multiple entities is not leveling the playing field. Tying the one time exemption to a responsibly connected person will greatly help level the playing field, although the only way to really level it would be to impose a limit on how many animals each responsibly connected person could transition, such as 250 animals.
In sum, attaching the one-time transition exemption to the “responsibly connected person(s)” would more effectively fulfill a primary goal of the proposed rule—to prevent organic dairies and or individuals, from transitioning multiple conventional herds or groups of animals. It would do so in a manner that would preclude producers from circumventing the one-time rule. When the operating entity is a dba (doing business as) operation, many certifiers will look for the responsibly connected person to hold legally accountable.
We understand that some certifiers may have limited support for requiring the tracking of herd owners and including that information in the organic certification, but it is a necessity. Those certifiers will have to follow the history of the responsible connected person(s), which may be difficult but an operation with several dba's will be just as difficult to track. Ownership in businesses are easily tracked electronically on a state level, so should be possible through the organic data-base. Certifiers are used to thinking of "operations" as being certified and associating "responsible connected people" to those operations. Without that connection, there is no legal entity to work with.
5. Implementation timeframe. We urge that all requirements of the rule be implemented immediately upon publications of the Final Rule, with the only exception being those dairies that have already started their transition and were already approved by a certifying agent. Having anticipated a Final Rule since 2015, no one can validly claim they need more time.
In summary, we need a Final Rule on the OOL and we need it now. We need to protect the integrity of USDA organic certification so, now that the glut of organic milk has finally subsided, we will have a level playing field on which we can re-establish a thriving organic dairy market that pays a fair price to producers while guaranteeing the integrity of the product for consumers. Such a regulation needs to be implemented immediately when the Final Rule is published with the only exception being those dairies that have already started their transition and have registered their Organic Plan with a certifier. Enforcement is the key, as it is with any regulation. Within certification agencies, inspectors and desk reviewers play key roles in enforcement of the status of transitioned livestock and verification of livestock records. If one chooses to benefit from organically certified production, one has chosen to actively engage with one's certifier in ensuring a high level of accountability. That level of cooperation is what this new regulation will need to have, as well as strict auditing of animal lists and enforcement, if it is to have any effect on the organic supply market and hopefully secure some form of future for small to mid-size organic dairies.
Posted: to Policy in the News on Tue, Jun 1, 2021
Updated: Wed, Jun 2, 2021