The good news is that compliance
with Country of Origin Labeling (COOL-beginning September 30)
should cost the beef industry $1.4 billion less than estimated
before amendments to the law diluted the record keeping
requirements somewhat.
The bad news is that the amended
law is still estimated to cost commodities impacted by the new
law, such as beef, $2.5 billion in incremental costs the first
year. That’s according to the summary of economic analysis USDA
is required to provide. For beef producers, USDA estimates the
ticket at about $9 per head.
Worse, the odds of receiving
higher prices based on COOL to offset program costs are nil to
non-existent.
“USDA finds little evidence that
consumers are willing to pay a price premium for Country of
Origin Labeling. USDA also finds little evidence that consumers
are likely to increase their purchase of food items bearing the
United States origin label as a result of this rulemaking,”
explains the report. “Current evidence does not suggest that
United States producers will receive sufficiently higher prices
for United States-labeled products to cover the labeling,
recordkeeping, and other related costs. The lack of widespread
participation in voluntary programs for labeling products of
United States origin provides evidence that consumers do not
have strong enough preferences for products of United States
origin to support price premiums sufficient to recoup the costs
of labeling.”
Imagine that? Labeling
commodities according to country never took place on a voluntary
basis prior to the law because too few consumers cared enough
about it—were willing to pay more for it—to make it economically
tenable. The law increases economic burden but does nothing to
increase consumer incentive.
According to the USDA analysis,
benefits of the new law will be small and will accrue mainly to
those consumers who desire country of origin information. And
the number of willing consumers likely has been over-stated by
studies proponents of the law used to indicate consumer
willingness to pay more for country of origin labeling.
“There are several limitations
with the willingness-to-pay studies that call into question the
appropriateness of using this approach to make determinations
about the benefits of this rule,” states the report. “First,
consumers in such studies often overstate their willingness to
pay for a product. This typically happens because survey
participants are not constrained by their normal household
budgets when they are deciding which product or product feature
they most value. Second, in most of these willingness-to-pay
studies, consumers are not faced with the actual choices they
would face at retail outlets. Third, consumers’
willingness-to-pay as elicited from a survey is a function of
the questions asked. Different questionnaires will yield
different results.”
In other words, if you could bid
what you wanted for a bull at auction, chances are you’d offer a
lot more than if you knew you had to actually settle up at the
end of the sale.
What Compliance Requires
At least complying with the amended law won’t require the
tracking and paperwork associated with the original one.
An industry-wide coalition of
livestock organizations announced in September that it adopted a
standardized affidavit to help producers comply with COOL.
According to officials with the
Kansas Livestock Association (KLA), the coalition’s goal was to
was to, “…create documents that efficiently move origin claims
along the chain of livestock ownership from the producer to the
processing plant… Cow-calf or stocker operators, for example,
can sign a continuous affidavit that remains on file with
primary purchasers and is in effect unless otherwise stated.”
Spun tighter, the documents
developed by the group should enable producers to comply with
COOL. USDA previously announced there will be a kind of 6-month
grace period after that date during which they will work to
provide producers the information they need to comply. KLA was
one of more than 30 organizations developing and adopting the
documents.
“Our goal was to create a simple,
efficient, and effective means of declaring livestock origin
from conception to consumer, and we believe this affidavit does
exactly that,” says Andy Grosetta, president of the National
Cattlemen’s Beef Association (NCBA), which is also part of the
coalition. “Producers can fill in information specific to their
cattle and assert the origin of any animal being sold. Livestock
marketers further along the ownership chain can use individual
affidavits to create a single, combined affidavit for a group of
animals.
“Representatives from every point
in the supply chain unanimously agreed to use this standardized
affidavit, which will greatly ease the burden that mandatory
COOL places on producers,” says Grosetta.
As well, Grosetta explains, “NCBA
is working with our industry partners on the issue of so-called
‘gap cattle,’ which are animals traded in the period between
July 15, 2008 (the date that declared all livestock present in
the U.S. as being of U.S. origin) and the September 30, 2008
implementation deadline. We are well aware that owners of these
animals would be very hard pressed to recreate the paper trail
documenting origin. The industry consensus is that current
owners should be considered to have first-hand knowledge of
those cattle. Therefore, these animals should be allowed to move
through the marketing chain using the standard affidavit.”
It’s that first-hand knowledge
that is key. Though not defined in the COOL interim final
regulation, Allie Devine, KLA’s Legal Counsel says a reasonable
interpretation would be someone who specifically knows the
origin of the livestock because they were born on their
premises, or the person has actual knowledge of where the
livestock originated.
You Own it Now
I was at a bull sale one time when the ring man and
auctioneer sold out to a guy in the high seats. When he balked,
having second thoughts, the ring man asked, “Sir, do you own
some cows?” The man said he did. “Well, that’s a good thing,
because you own a bull now.”
COOL’s a whole lot like that for the industry buyer. A program
that would have allowed sorting in all of the export cattle,
rather than sorting out all of the domestic cattle would have
required a national ID and tracking system, something expressly
prohibited by the COOL Law.
Instead, the industry has a law
that carries some extra burden and offers nothing of value in
return. If the definition of a white elephant is something that
costs more than what it’s worth, this is it.
You can find easily downloadable
affidavits at the Kansas Livestock Association website:
http://www.kla.org/mCOOL.htm. You can find a list of
frequently asked COOL questions from USDA at:
http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5071922.
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