Agrinews_october 08.indd

v o l u m e   • i s s u e 9 • O c t o b e r 2 0 0 8
Mandatory Country of Origin Label ing (MCOOL), the producer to establish the origin of the animal.
which was part of the 2002 Farm Bil , fi nal y went into Producers are expected to maintain normal business eff ect September 30, 2008. Th e initial legislation mak- records at their farm to support their affi davit claim if ing COOL mandatory was delayed in 2004 and 2006 an audit of a label claim leads to their farm.
and was amended in 2008 before the current version Congress and the USDA have identifi ed four catego- was included in this year’s Farm Bil . Th e law amended ries of meat products under MCOOL. Th ese are: the Agricultural Marketing Act of 946 and is intended . Born, raised and slaughtered in the U.S.: to inform retail consumers of the origin of commodi- ties covered in the law. Th ese include: muscle cuts and 2. Multiple countries of origin, i.e., Canadian-born ground meats of beef, lamb, goat and pork; wild and feeder pigs/cattle fed in the U.S.: "Product of U.S. farm-raised fi sh and shel fi sh; fresh and frozen fruits and country X and/or country Y." Ground beef: and vegetables; raw peanuts, pecans, macadamia nuts "May include product of (list sources)." and ginseng. Chicken muscle cuts and ground meat 3. Animals imported for immediate slaughter: were added to MCOOL with the 2008 amendments.
"Product of country X and U.S." MCOOL applies to retail grocery fresh and frozen 4. Imported fi nished products (to be sold at retail): meat sales with exemptions for smal grocery stores, butcher shops, restaurants and food service outlets. Processed meats are also exempt and the United States Department of Agriculture (USDA) has defi nitions and Initial y, many packers and retailers planned to use categories for covered products. Th ere is a six-month Category B for most, if not al , of their product, includ- educational phase in the period where the USDA wil ing those animals that were Category A animals. Th is be monitoring implementation before enforcement is strategy was aimed at reducing costs of label ing and ful y imposed. See more details at: product segregation by having only one label. Propo- nents of MCOOL and some members of congress that supported the rule raised concerns that such action was MCOOL requires retailers to inform consumers In late September, at the urging of Congress, the at the point of purchase of the origin of the covered USDA changed their stance on the use of the Category commodity, and the retailer must maintain suffi cient B label to reaffi rm that if animals are born, raised and records to substantiate the label claim. In the Interim slaughtered in the U.S. their product should carry the Rule, USDAAMS states that “the supplier of a covered “Product of the U.S.” label. As a result, some packers commodity (packer) that is responsible for initiating a have now switched to using both A and B, or in some country of origin declaration must possess or have legal cases only buying Category A animals.
access to records that are necessary to substantiate the It is too early in the process to know what the im- plications of MCOOL wil be on prices at the farm or Packers are al owed to accept a signed affi davit from retail level. Some packers have stated that they wil buy only U.S. animals. Others have designated a specifi c plant or time (day or shift ) that they wil take Category B or C animals. Th is strategy wil mini- mize label ing confusion and costs, but increase transportation costs for the animals — and perhaps the meat — that have to go to a diff erent plant. Pro- ducers that had fed Canadian-born cattle or hogs may choose to not buy im- ported feeders if they have to haul the fi nished animal further to sel them. Likewise, producers near a plant that is buying Canadian-born animals may choose to feed imported animals as prices adjust.
Th e price impact is even less clear. Th e cost of label ing and record keep- ing is bore by al products because U.S. as wel as imported product must be label ed and records must be kept. Companies that do not buy imported animals wil have less of these costs because they only have one label to track. However, if they had bought imported animals before, they wil have to bid additional U.S. animals away from other packers, which should be supportive of farm level prices. Packers that do buy imported animals wil want to buy enough to run the plant, day or shift effi ciently and may at times have to bid up for imported animals.
Conventional wisdom and early rumours are that imported animals are being discounted by packers. However, it is diffi cult, if not impossible, to track because the USDA is not reporting separate prices for separate cat- egories of product or animals. Envision the market report on the radio with prices for diff erent grades and origins of animals. While one report for cattle prices did state “Domestic sources only,” there was not a price for cattle fed in the U.S. but born outside the U.S. as a point of comparison.
If there is a higher cost of processing, label ing, segregation, transporta- tion, etc. for Canadian-born pigs or Canadian- or Mexican-born slaughter cattle, it wil be passed forward to consumers or, more likely, back to the feeder in the form of lower prices. In turn, the feeder wil pay less for the feeder animal. Al else equal, lower prices for imported feeder animals would discourage Canadian and Mexican producers from sending feeder animals to the U.S. One result is that the animals may be fed and slaughtered in their home country and the meat may be imported directly to retail with the ap- propriate label. We would expect this product to be less competitive at the retail counter, otherwise this trade would already be occurring rather than importing the feeder animals to the U.S. Another possibility is that these animals are fed in their home country but compete with U.S. meat in export countries. Th e overal supply of meat does not change until prices are low enough in Canada or Mexico to cause their producers to reduce supplies.
However, everything is not equal. First, MCOOL wil increase farm-to- retail cost at least some from where it was before. Imported product go- ing direct to retail wil not have new added cost from their previous proce- Second, and perhaps more important economical y (but unrelated to MCOOL), is that the value of the U.S. dol ar has increased relative to other counties. As a result, imported products are now cheaper on U.S. shelves that they were before the fi nancial crisis. Likewise, feeder pig and feeder cattle producers in Canada and Mexico receiving dol ars for their animals A G R I - N E W S • O C T O B E R 2 0 0 8 Producers must communicate with their buyers to know their market- ing options and they should talk to them wel in advance of marketing day in case they need to fi nd another buyer. If they are thinking about sel ing exported feeder animals, they should talk to buyers about locations where they can deliver and what, if any, price discounts they may expect. U.S. pro- ducers who are buying feeder animals from anyone they need to get a signed affi davit from the sel er stating the origin of the animals and keep the paper work on fi le for at least a year so that they can make a claim of origin when


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