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CATTLE TODAY

HUNTIN' DAYLIGHT -- BEWARE WHITE ELEPHANTS

by: Wes Ishmael

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, “…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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