Implications of U.S. and Global Organic Dairy, Livestock and Poultry Production
for International Trade
(Part II of IV)

I. Overview of U.S. Organic Industry & Organic Livestock Production

Industry sources estimate the annual growth rate of U.S. organic agricultural production at more than 20 percent annually since 1992, out-pacing most other domestic agricultural sectors. Nonetheless, organic crop and livestock production together still account for little more than 1 percent of total U.S. production. High barriers to entry, such as large start-up and managerial costs; smaller, profit-limiting economies of scale; and risks of shifting away from conventional farming, have prevented more widespread adoption of organic farming. Despite these barriers, the future of U.S. organic production looks bright.

The Organic Foods Production Act (OPFA) was adopted as part of the 1990 Farm Bill and laid the foundation for the creation of the National Organic Program (NOP), which will be implemented by the USDA Agricultural Marketing Service (AMS). OPFA has three purposes: to establish national standards governing the marketing of organically produced products; to assure consumers that organically produced foods meet consistent standards; and to facilitate interstate commerce in fresh and processed food that is organically produced. Within the context of OFPA, AMS drafted and put forth for public comment a set of proposed organic regulations in December 1997. Having received a record number of responses during the first public comment period, AMS revised the regulations and recently re-issued them for a second public comment period, which closed on June 12, 2000. AMS intends to finalize the proposed regulations by the end of the 2000 calendar year.

According to a recent USDA Economic Research Service study, certified organic production in the United States more than doubled from 1992 to 1997, bringing total land converted to organic production systems to more than 1.3 million acres in 49 states. Approximately two-thirds of this farmland was dedicated to growing crops, with the remaining amount used as pasture and rangeland. Nearly half of the states with organic agriculture reported having certified organic livestock production, with eggs and dairy representing by far the fastest growing sectors. As shown in the table below, over the 1992-1997 period production of organic laying hens increased to over half a million birds (1,123 percent) while the number of certified organic milk cows increased by nearly fivefold.

Organic meat and poultry production has not experienced the same growth rates as dairy and eggs and, in fact, declined over the 1992-1997 period. This is partly due to the industry’s inability to label meat and poultry as organic until February 1999, when a provisional label was approved by USDA/Food Safety and Inspection Service. Food crops and non-meat animal foods (eggs and dairy products) are regulated by the Food and Drug Administration and have been allowed to carry an organic label throughout the 1990's. Besides restrictions on labeling, growth in organic meat production has also been slowed by a shortage of organic feed grains and growing demand for these grains in human and livestock consumption.

In 1997, U.S. production of organic eggs was concentrated in three main regions, including the west coast, the southeastern coast, and New England. California accounted for 65 percent of all certified organic laying hens, followed by Virginia (12 percent), Pennsylvania (7 percent) and Ohio (6 percent). North Dakota produced nearly 62 percent of U.S. organic poultry, while New Hampshire and Pennsylvania accounted for 15 and 11 percent, respectively. Michigan ranked as the largest organic beef cattle producer in 1997, while the majority of organic dairy cows were found in the mid-western states of North Dakota, Wisconsin, Minnesota, followed by Pennsylvania and California.

Growth trends in organic livestock production over the 3-year period of 1997 to 2000 are difficult to measure as few hard statistics are available. Anecdotal evidence and discussions with industry representatives indicate that growth in organic poultry and egg production has remained consistent with the regions described above. Organic beef production has strengthened in Colorado, while organic dairy production has increased in California and Maryland.

While the annual growth rate of the U.S. organic agricultural production continues to out-pace most other domestic agricultural sectors, organic crop and livestock production together account for less than 1 percent of total U.S. production. High barriers to entry, such as large managerial costs, risks of shifting away from conventional farming, limited awareness of organic farming systems, lack of marketing and infrastructure, inability to capture market economies, insufficient numbers of processors and distributors, and limited access to capital, have prevented more widespread adoption of organic farming. These barriers to entry are typical of nascent industries and will most likely be overcome as the organic sector secures its place within the market.

Proposed U.S. Organic Livestock Production Regulations

Organic livestock production aims to fully integrate animal and crop production, bringing forth a symbiotic relationship of recyclable and renewable resources within the farm system. Livestock production is seen as a component of a wider, more inclusive organic production system. Organic producers must take into consideration many factors effecting the overall balance of the farm system, in addition to the process by which livestock is produced and raised. These factors include, but are not limited to: minimizing environmental impact, animal waste and soil nutrient management, organic feed requirements (including limited use of feed additives), accommodating natural behavioral trends and needs of livestock animals, and transition regulations from conventional to organic livestock production.

According to the regulations outlined in subpart-C of the proposed rule of the National Organic Program, organic livestock production must maintain or improve the natural resources of the farm system, including soil and water quality. Producers must keep livestock and manage animal waste in such a way that supports instinctive, natural living conditions of the animal, yet does not contribute to contamination of soil or water with excessive nutrients, heavy metals, or pathogenic organisms, and optimizes nutrient recycling. Proposed manure composting techniques adhere to Natural Resource Conservation Service composting standards. However, these standards may be revised before finalization of the standards to include more stringent time and temperature requirements to minimize the presence of human pathogens.

Livestock living conditions must accommodate the health and natural behavior of the animal, providing access to shade, shelter, exercise areas, fresh air, and direct sunlight suitable to the animal’s stage of production, or environmental conditions, while complying with the other organic production regulations. For example, organic pasture is required for ruminant animals, while bedding, if consumed by the animal, must comply with organic feed requirements. While confinement of animals is not routinely allowed, it is permitted in temporary situations, such as: inclement weather; the animal's stage of production; conditions under which the health, safety, or well-being of the animal could be jeopardized; or risk to soil or water quality.

The proposed organic standards require that any livestock or edible livestock product to be sold, labeled, or represented as organic must be maintained under continuous organic management from birth or hatching until brought to market. However, there are four exceptions:

• Poultry or edible poultry products must be from animals that have been under continuous organic management beginning no later than the second day of life.

• Milk or milk products must be from animals that have been under continuous organic management beginning no later than 1 year prior to the production of such products.

• A non-edible livestock product, such as wool, must be derived from an animal that has been under continuous organic management beginning no later than 1 year prior to the harvest of the nonedible product.

• Breeding stock may be brought from a non-organic operation into an organic operation at any time, provided that, if such livestock are gestating and the offspring are to be organically raised from birth, the breeder stock must be brought into the organic operation prior to the last third of pregnancy.

The producer of an organic livestock operation must also maintain records sufficient to preserve the identity of all organically managed livestock and all edible and non-edible organic livestock products produced.

Organic livestock feed, including pasture and forage, must be produced organically, and health care treatments must fall within the purview of accepted organic practices. The National Organic Standards Board (NOSB - an advisory board to the USDA National Organic Program) has recommended a list of synthetic substances, known as the National List, allowed in organic livestock production, yet frequently with specific use restrictions. Nearly all synthetic animal drugs and hormones used to promote growth, control parasites, supplement feed and/or act as feed additives in amounts above those needed for adequate growth and health maintenance of livestock at its specific stage of life are prohibited in organic production. Plastic pellets for roughage, formulas containing urea or manure, or additives containing animal by-products are also prohibited. All medical treatments based upon synthetic substances must fall within the purview of the National List and organic practices to maintain organic status. When preventive practices and veterinary biologics on the list of NOSB accepted products are inadequate to prevent sickness, the producer must administer conventional medications. However, livestock that are treated with prohibited materials must be clearly identified and can not be sold, labeled, or represented as organic.

Organic Livestock Production...Possible Challenges to the Producer

Organic livestock producers face a unique set of challenges relative to organic crop producers. Given a relatively small, or nearly non-existent, organic breeding stock base, the opportunity costs of transitioning from conventional to organic livestock production may likely be high as the proposed regulations require life-long organic status of organic livestock animals.

Furthermore, the prohibition of synthetic feed additives, growth promoters, and other pharmaceuticals will necessitate less intensive livestock production and a more vigilant production technique based on preventative measures and early intervention in cases of sickness within herds. Contrary to conventional systems, treatment of animals with conventional veterinarian medicine will, in most cases, result in the removal of that animal from organic production, thereby foregoing marketplace premiums yet still reaping the higher costs associated with organic production.

Animal waste management in organic agriculture presents a complex set of issues for organic livestock producers. Drafters of the proposed rule want to ensure safety and minimize the presence of pathogens in the use and application of raw manure in organic crop production. The NOSB is recommending both time and heat requirements for proper composting of raw manure before it is applied to agricultural crops. These standards will be based on scientific studies to ensure integrity of the proposed rule. Time requirements could very well differ for above ground crops (requiring less composting time) and crops that are either grown or come into contact with the soil (requiring more time).

Stringent animal manure composting and application regulations could have a dramatic impact on the profitability of organic livestock production compared to conventional livestock production. Increased production costs will result from higher storage costs for longer manure holding periods and lower production efficiency due to the lower animal density/land ratio requirement (fewer animals per acre of tillable land for manure disposal). Currently there are no standards for raw manure usage in conventional agriculture. Therefore, production standards for raw and composted manure in organic agricultural production could have far-reaching effects on conventional agricultural production as it raises the question of manure safety and adequate elimination of human pathogens.

Due to the length of the transition period and the organic feed requirement, industry representatives have raised concerns of increased costs of production and opportunity costs. These requirements may create barriers to entry for farmers who have limited access to investment capital and less financial flexibility to accommodate herd conversion requirements. However, proponents of stringent transition requirements countered that relaxing livestock transition requirements (relative to more stringent crop transition regulations) would compromise the philosophic integrity of organic production systems. The organic production guidelines outlined in this paper are subject to the Final Organic Standards rule, expected to be released by USDA/AMS sometime this year.

Links to other Parts:

Introduction II. Overview of Global Organic Agricultural Production III. Organics in FAS

Last modified: Tuesday, December 16, 2003