Beef industry preps for COOL times | TSLN.com

Beef industry preps for COOL times

Adam Templeton
DTN Staff Reporter

OMAHA (DTN) – Although some U.S. cattle producers may be “cool” with the 2008 farm bill’s country-of-origin labeling mandate, the revised program has seen heavy resistance from trading partners and the meatpacking industry.

Canadian cattle producers have threatened to sue the U.S. over COOL, citing both the North American Free Trade Agreement and the World Trade Organization. Canadian officials claim the new regulations will pump up the cost of Canadian livestock and create a trade barrier.

COOL requires cattle producers to provide proof of where their animals were raised. Packers then label the animals as “Product of the U.S.” or “Product of the U.S. and Canada,” and so on.

The USDA’s Agricultural Marketing Service estimates the initial cost of implementing COOL to be $2.5 billion. A breakdown of the price tag per individual puts the cost at $376 per producer, $53,948 per intermediary and $235,551 per retailer. Groups supporting COOL argue those projections are too high, while traditional opponents of COOL maintain the costs could be even higher.

The law goes into effect Sept. 30. After that, consumers should be able to pick up a piece of beef, pork, chicken or lamb at the grocery meat case and see just where the animal from which that meat came was born, raised and slaughtered. The law does not affect processed food products or restaurants.

Rob McNabb, general manager of operations for Canadian Cattlemen, said the additional costs incurred by packers and feedlots complying with COOL regulations would be passed on to Canada’s livestock industry. Coupled with rising feed and fuel costs, the country may have to discount animals exported to the U.S. to remain competitive.

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“This (COOL) by itself doesn’t make us uncompetitive,” McNabb said. “But, if we’re already incurring higher costs and we discount prices, it’s simple math – we’re not making the returns we should.”

Although the final impact of COOL has yet to be determined, McNabb said the program could “distort pricing.”

On July 15, all animals in the U.S. were “grandfathered” into COOL, officially declared to be of American origin. Following that event, there was a reduction in the buying and exporting of Canadian feeder cattle, and competitive bidding in Canada also took a plunge, McNabb said.

Mexico has expressed similar concerns about the fate of its livestock.

Ross Wilson, CEO of the Texas Cattle Feeders Association, said he’s heard talk of Mexican cattle producers worrying about their cattle depreciating in value.

“If cattle are discounted and trade at lower values because of some presumed additional expense, and that presumed additional expense works its way into the system in the form of lower bids, then there’s potential there to create concern in Mexico,” Ross said.

He warned the cattle trade between the U.S. and Mexico is a “two-way street,” as America’s neighbor to the south is the biggest purchaser of U.S. beef.

“We need to be sensitive to the concerns of our No. 1 trading partner,” Ross said. “If the value of Mexican cattle were to go down because of COOL, there is a probability that Mexico will then raise questions about the need to import U.S. beef.

“We will continue to buy Mexican feeder cattle – the question is, ‘At what cost?'” he added.

American organizations remain divided on COOL. Some, such as National Farmers Union, believe U.S. livestock producers stand to benefit from the program’s “Made in the USA” label.

“We kind of think it’s a no brainer,” said Liz Friedlander, National Farmer’s Union director of communications. “Farmers support it because they can market products as made in the USA. It’s a good food-safety tool. It’s good to know where your food came from.”

On the other side of the line are U.S. groups that oppose COOL. They claim the program tacks unnecessary costs onto an already expensive industry, and its rules do nothing to prove a meat’s quality.

“COOL is not in any way a mark on food safety,” said Heather Zaughan, spokesperson for the National Cattlemen’s Beef Association. “This is just a way to get more information to the consumers.”

The NCBA resisted mandatory COOL, calling the program a marketing tool rather than a safety measure.

“We don’t believe it’s the government’s role to market beef,” Zaughan said.

And then there is the struggle to implement COOL “with the least amount of business destruction possible,” Zaughan said.

Other groups maintain COOL isn’t worth the money it will take to implement it.

“There are no meaningful benefits to be achieved through this rule,” said Mark Dopp, senior vice president of regulatory affairs for the American Meat Institute.

“Nonetheless, COOL is the law and goes into effect on Sept. 30 and we are doing our best to help the industry get ready,” he added.

Packers especially need to be aware of how the new rules apply to them. Because packers are considered “initial suppliers” of commodities covered under the program, they are responsible for obtaining proof of an animal’s origin from its producer.

As a way of keeping costs down, many typical business documents can be used to back-up livestock origins. Import documents, producer affidavits, calving books and health certificates are all sufficient proof of an animal’s origin.

COOL also states that official National Animal Identification System ear tags or accompanying markings are adequate evidence.

Livestock organizations acknowledge the ability to use business documents as proof of animal origin to be an improvement from the version of COOL included in the 2002 farm bill.

The Montana-based ranchers’ group R-CALF, a major driving force behind COOL, praised the new additions to the law.

“The rule that was written in 2002 was very onerous on every sector of the industry,” said Bill Bullard, CEO of R-CALF. “The USDA wrote the (original) rules in such a way as to make them unworkable and cumbersome.”

U.S. cow-calf producers stand to profit from the program, largely because consumers understand that other countries around the world often don’t have the same health standards as the United States, said Shae Dodson, R-CALF’s communications coordinator. “It’s also important that we can separate and distinguish our product as a USA product – born, raised and slaughtered right here in the USA.”

Educated consumers are more likely to gravitate toward 100 percent U.S. beef, increasing the bottom line for cattle producers around the country, she added.

Despite the apparent perks for U.S. livestock producers, some groups feel there are still unanswered questions.

There has been some dispute as to whether a brand identifying an animal as from a certain country is sufficient proof in determining origin. A person with “firsthand” knowledge of an animal can vouch for its homeland, but just what qualifies as firsthand knowledge also remains to be seen. And some groups want an industry-standardized affidavit to give packers to verify animals’ origins.

Both Wilson and McNabb agree the final word on just how much of a financial burden COOL will impose on producers lies with the other end of the livestock industry, the packers and the retailers.

“It’s all driven through the value chain,” McNabb said. “If retail does it one way, the packers have to be prepared.”

And if a packer doesn’t follow COOL protocol, then other countries lose out on a bidder for their cattle, he added.

adam templeton can be reached at adam.templeton@dtn.com

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