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Texas Agriculture Archive

January 17, 2003

Country-of-Origin Labeling
A good idea or a producer nightmare? You be the judge...

By Lana Robinson
Field Editor

Be careful what you wish for. You just might get it—and more! That's what some producers and others are saying about recent developments in USDA's Agricultural Marketing Service plan with regard to country-of-origin (COOL) labeling. What began as a concept to distinguish American-grown meat, produce and fish from those of other countries is quickly evolving into an identification system of sorts. Producers, packers and retailers have until March 30 to submit comments regarding guidelines before the final rule for the mandatory phase of COOL is developed and implemented Sept. 30, 2004.

Although the statute contained in the new farm bill specifically states that USDA cannot implement an ID system as a means of achieving country-of-origin labeling, the agency plans to require producers to keep records on every animal from birth and beyond, to ensure that the animal was born and raised in the USA. The question observers are asking is "How do you keep a record on every animal without an ID system?"

American Farm Bureau Commodity Specialist Joe Miller believes USDA-AMS has undershot what their proposal would cost farmers with their estimate of a billion dollars to implement.

"We think costs are going to be somewhere well above $3 to $4 billion just at the producer level to implement this, which is one of the reasons we're saying this is not what was meant when the statute was passed," said Miller. "Nobody intended to put that type of burden on the producer."

AFBF is working with other groups to develop a standardized ID system, but maintains that it should be voluntary rather than mandatory, he added.

Proponents of the labeling, in the initial stages, said current government policy, which allows imported livestock to carry USDA inspection labels when the animals are processed in U.S. packing facilities, is misleading and patently unfair to American producers. After failed legislative attempts to amend the Federal Meat Inspection Act to require imported product labels, Farm Bureau backed a process-verified program certified by USDA. Process verification would have required that certified beef originate from cattle that are processed, raised and fed a minimum of 100 days in the United States. The idea was that labeling would be a way to showcase American products, to inform the American consumer and help assure consumer confidence in the products they choose.

In the end, Farm Bureau supported the country-of-origin labeling provision contained in the new farm bill. Under the proposal, only those items raised and processed in the United States will be called a U.S. product. The new provision applies to pork, beef, lamb and fish products, fruits, vegetables and peanuts. Following a two-year voluntary implementation period, the program will become mandatory for all products.

Other issues pushing ID

Jon Johnson, Texas Farm Bureau associate director of Commodity and Regulatory Activities, said record-keeping activities and tagging, if it comes to that, will be additional work and expense for producers.

"If it continues the way it's headed, the COOL could force us into a national livestock identification program sometime in the near future because we will have to prove where the meat came from," said Johnson. "There are several issues pushing the ID program, such as food safety, animal diseases and export markets. The current thinking on livestock ID would have you identifying your animals only when they left your premise. The type of ID has not been decided. It could be just a metal tag, a bangle tag with some type of electronic device or a small electronic button."

Kevin Huffman, a cattle producer from McGregor, was a recent participant in Texas Farm Bureau's AgLead European tour. Huffman said the ID system there was consumer-driven, but far from ideal.

"They've got them tagged from point of origin, but not tagged to the supermarket," Huffman noted. "They were in lots of 100 animals or possibly larger. I had always thought their ID system was perfect, but I found out it's not...I don't think some of the rules, like having the animal tagged within 48 hours from birth, would be acceptable here, but over there, to sell it they have to do it."

Huffman has his doubts about how such a system would work in the U.S.

"I think it's impossible to get there. I don't know how you can ever say this particular T-bone steak came from this cow, because of the process," he said.

Huffman's primary concern, however, is the costs associated with an ID program. He doesn't think the labeling will help in terms of consumer acceptance abroad.

"Consumers should foot the bill, if that's what they truly want. As far as foreign trade goes, the EU (European Union) is going to grow what they need, if they have a surplus, they'll export it. There will always be a reason not to buy our products," he opined.

Pros and cons

James E. Link, John Biggs professor in Texas Christian University's Range Management Program, in a recent newsletter to alumni, noted that COOL regulations cover cattle, pork, sheep, fish, fruit, vegetables and peanuts, but not poultry. Lobbyists for that industry got poultry exempted.

"The number one competitor of beef—chicken—is not going to be required to meet the new labeling requirements. Also, the guidelines are for products that are sold at the retail level. Foodservice sales are also exempt. So, when someone is eating at their local restaurant, they will not have to be informed as to the country-of-origin of the food that they are consuming. Since 45 percent of Americans spend their food dollars eating out, this means that almost one half of the consumption of food products will not be made aware of the country from which their food came. What difference does this make you may ask? It simply shows that the food service consumer is not concerned with where the food came from. Consumers did not ask for these new regulations, the producers did."

Link said surveys did not show evidence that consumers want labeling information. In fact, Link said a survey conducted for the International Food Information Council in August 2002 showed that 75 percent of the consumers said that no additional information is needed on food labels. Link suggested that if there were a definite demand, someone in the industry would have been using voluntary COOL to promote their product over the competition.

But the Independent Cattleman's Association, strong supporters of mandatory COOL during the farm bill process and beyond, say consumers are unmistakably clear in voicing their support for mandatory country-of-origin labeling. ICA cites an August 2001 poll conducted by the publisher of The Packer newspaper, which showed that nearly four of every five consumers supported mandatory country-of-origin labeling of fresh produce. Also, ICA pointed to a March 1999 Wirthlin Worldwide survey which indicated that 86 percent of consumers support country-of-origin labeling for meat products.

The mandatory labeling also had strong congressional support. Both the Senate-passed (S. 1731) and House-passed (H.R. 2646) versions of the farm bill adopted language in support of mandatory country-of-origin labeling. House members voted nearly three to one (296 to 121) in favor of mandatory country-of-origin labeling for fresh produce.

ICA has not backed off its position favoring mandatory labeling and rebuts some of the arguments made against it. With respect to claims that trade retaliation will make implementing country-of-origin labeling difficult, ICA noted that numerous foreign countries have their own country-of-origin labeling requirements for perishable agricultural commodities and meat products. Most recently in January 2002, the EU Commission issued stringent beef labeling rules requiring that consumers be informed at the retail level of the country in which an animal was born, raised and slaughtered.

Link and others still argue that mandatory COOL will end up costing the industry money that cannot be recovered from the market place and will come out of producers' pockets.

"It appears to me that the end result of COOL will be quite simple. It will be complex to implement. It will be very costly to everyone in production from conception to consumption. Each animal will have to be individually identified and tracked from birth to final consumption. We will have a significant added cost to our production chain and get absolutely nothing for it. We will experience no increase in demand for the process, only cost," he suggested.

Link said Cattle Buyer's Weekly cost projections were as good as he had seen. CBW estimates it will cost $5 per head to track cattle from ranch to the packing plant and another $15 per head for packers to reconfigure their slaughter and fabrication departments to maintain the identity of cattle into boxed beef.

"The cost of these two steps, based on 2001 production, would be $708M. Then retailers will spend 5 cents per lb. of beef sold to reconfigure their meat departments to maintain product identity, to maintain required recordkeeping at individual stores and to place COOL labels on every beef item in the meat case.

"Based on 2001's production of 26.107 billion lbs., and assuming 52 percent was sold at retail, that's another $679M. Adding the $708M earlier calculated means a total of $1.387 billion," he said.

ICA counters the argument that a mandatory system will be too costly by holding up Florida's cost-effective, mandatory country-of-origin labeling program, in force since 1979, for fresh produce. According to the Florida Department of Agriculture and Consumer Services, in Florida the food industry has estimated a cost of approximately $5 to $10 per store per week for country-of-origin labeling, ICA said.

Small producers could be hurt

Herff Cornelius, past chairman of Texas Farm Bureau's Beef Committee, was an early opponent of the country-of-origin labeling, which he saw as a populist movement.

"It's not going to be good for producers. I think many people who wanted it were thinking patriotic instead of logically. On the cover, it sounds like a good idea to say it's raised in the U.S. But it doesn't work that way. The ones they were out to help are the ones that are hurt the most," he said.

Cornelius said larger producers that are really in beef as a business may be able to survive COOL, and, in the long run, may actually benefit from it.

"But those with 100 head or less are going to have to do the bookkeeping. If they don't go along with it, and have no record when they take a steer to the sale barn to show who all's had him, will they be discounted and if so, how much? They're just into the potluck bin and nobody cares," he suggested.

Some would argue that the small producer could sell his cattle for institutional use rather than retail and avoid the labeling requirements. However, Cornelius points out that cattle are not individualized at that stage of the game.

"They wait until the carcass is graded to determine if it is better for restaurant or processing," he said.

Cornelius also believes the USA label may be a violation of international trade rules. He suggested that the country-of-origin labeling might have been a better concept for branded beef products where the producer direct markets what he has and typically knows the vital information on his animals. But he sees lots of problems for the beef industry if COOL proceeds as planned.

"I'm not looking forward to it. We can do it, but this is a big industry. Portions of every animal will have to be labeled. I'd hate to know I was a packer. And if the price of beef goes up because of it, consumers will turn to what's cheaper. It will all fall back on the producers, because we're price takers," he said.

Export market effects

Dan Dierschke, a Travis County cattle producer and TFB state director from District 8, agrees with Cornelius that the labeling may create difficulties in the export market.

"The Mexicans are saying they are going to cut off our sales of calves, and that they may have a WTO (World Trade Organization) violation. Mexico is currently our third largest market. If they shut us off, that's really going to hurt. The Canadians are just in a total uproar about it. A lot of their product is sold in the U.S. And some of our U.S. sheep producers are concerned that a product labeled from New Zealand may sell better because they have quite a history of quality. On the other hand, some countries like Japan may like a system of traceback. There is a sense in Japan of wanting a story with the meat. It sells very well to show the farm where animals come from, but that’s not a real strong issue yet,” said Dierschke.

However, Dierschke, who traveled to Brazil with other members of the Texas Farm Bureau board of directors last spring, said it could be moving faster than some folks think. And the momentum may make it necessary for the U.S. to follow suit with competitors.

“Ninety percent of the cattle in Brazil are Zebu-based. The Zebu Association there is an incredibly powerful organization, with herd records going back for decades. They are currently implementing an ID system. It may be that if we want to compete, we’re going to have to do the same thing or risk losing our export market. That would be a huge chunk of revenue, 10 to 12 cents a pound, if we totally lost all our export market.”

Dierschke said some other commodity groups may also be getting cold feet. He reported that pork producers, during a U.S. Meat Export Federation meeting in Long Beach, Calif. he attended several months ago, had asked to be removed from COOL requirements.

“It’s a very hotly debated and contested issue. There are just so many unintended consequences. The assumption is that if the product in the meat case says ‘American,’ people will leap to buy it. Upon further examination, we don’t know that’s viable. What we do know is because of our fabrication system, it’s just a tremendously complex issue. When you have ground beef, for example, that could come from 500 animals. What do you put on the label? Also, animal ID is entangled with liability. And most people don’t want animal traceback to their farm because if at some stage of growth, something happens—maybe it happened in a feedlot, while they were grazing on pasture, or as a result of disease or defect—but if something goes wrong, everybody’s held responsible.”

For more information on the USDA-AMS proposal regarding country-of-origin labeling, go to the agency’s website: www.ams.usda.gov/cool.