Benefits and Costs Associated With An Animal Identification System for Cattle in the United States

1. Benefits and Costs Associated With An Animal Identification System for Cattle in the United States Prepared by: DeeVon Bailey, Ph.D. Professor Department of Economics and Cooperative Extension Service Utah State University Email: dbailey@econ.usu.edu Western Extension Marketing Committee Western Center for Risk Management Education

2. Why Is an Animal ID System Being Implemented in the United States? • BSE case of December 2003 • Other reasons – some directly connected to BSE and some indirectly connected • Purpose of this presentation is to discuss • Reasons for implementing animal ID • Potential benefits obtained from an animal ID system • Potential costs associated with an animal ID system

3. Evolution of Animal ID Programs in the United States • National Identification Work Plan (NIWP) – first official public effort to examine animal ID in the US • The US Animal Health Association accepted the NIWP in October 2002 • Asked USDA, APHIS to develop a team to develop an implementation plan • This implementation plan became the US Animal Identification Plan (USAIP) • Has since evolved into the National Animal Identification System (NAIS) • Basically same as USAIP • Same blueprint for numbering and standards for data flows • Radio frequency identification (RFID) not recommended technology in the NAIS • Both emphasize animal disease control as the reason for implementing animal ID

4. Animal Disease Control • BSE is a concern • However, other animal diseases such as FMD and Brucellosis may be even greater dangers to the economic health of the US cattle industry • The ability to track animal movements will aid in locating the source and spread of animal diseases • Implementation of the NAIS depends on the cooperation of state departments of agriculture (state veterinarians) • Individual states responsible for premises identification • SDAs will also probably be involved in issuing ID numbers for premises and animals

5. Food Safety and Bio-Security • Traditional food safety systems were designed assuming the greatest risks for food borne illness (bacterial contamination) occurred at the processing or food preparation levels • BSE is a fundamentally different problem than bacterial contamination • thought to originate with farm level inputs • traditional systems not designed to identify BSE

6. Food Safety and Bio-Security Continued • Cattle change hands often (5-6 times on the average during an animal’s lifetime) • Long incubation period for BSE means that an animal has likely changed hands several times before symptoms begin to express themselves • Need to track locations where animal(s) has been and herd mates to identify feed sources and other potentially sick animals

7. Bio-Security • Other types of contamination may be limited, or at least contained, if a tracking system is in place • Unintentional contamination • Intentional contamination (bio-terrorism) • A role for both the private and public sectors exists to ensure food safety

8. Market Preservation and Market Development • Some of the US’s principal competitors and customers have or are in the process of implementing animal and meat tracking systems • For example, the European Union (EU), Canada, Japan, Australia, and New Zealand • Several economic studies have suggested that there may be important economic reasons, besides for controlling animal disease, for implementing an animal ID system • Consumers may be willing to pay more for meat products that are traceable • Some consumers may be willing to pay for other characteristics, besides traceability, that can be verified using animal and meat tracking systems. Examples include humane animal treatment, environmental responsibility, and social responsibility

9. Different Traceability Definitions • EU legal definition for traceability is EU General Food Law Reg. EC No. 178/2002: “The ability to trace and follow a food, feed, food-producing animal or substance intended to be or expected to be incorporated into a food or feed, through all stages of production, processing and distribution.” • Many American agribusiness firms consider this definition to be broader than what is necessary to achieve specific food safety or quality assurance goals. • Desire for more flexibility • Customize rules to meet specific goals

10. Why Different Traceability Systems Exist • EU suffered a massive breakdown in consumer confidence as a result of its BSE crisis in the 1990s • In general, European consumers have less confidence in government to assure food safety and quality than do Americans • The European BSE crisis was on a much larger scale than the BSE crisis in the United States and Canada • In an effort to restore consumer confidence, the EU wanted to impose strict accountability at every level of the marketing chain

11. Precautionary Principle • The EU has applied the “Precautionary Principle” (PP) to public food policy • PP suggests that short-term food policy decisions may have unknown, long-run consequences, but are often made without conclusive scientific evidence of the absence of any long-run harm. • Precaution should be exercised in developing food policy without conclusive scientific evidence • GM debate • Traceability debate • Labeling debate • Doesn’t necessarily mean a food product in question cannot be sold, but may call for strict labeling requirements

12. “Sound” Science vs. the PP • The sound science argument contends that as long as no scientific evidence of harm exists, that food products should be considered safe • The PP argues that food products should not be considered safe until the absence of harm has been proven • American food industry has resisted the PP • Restrictions can be applied even in the absence of scientific proof of harm • The restrictions principally affect products imported into the EU and are, in fact, trace barriers • Rise of dichotomous systems in world meat markets – some systems with traceability and some without

13. Estimated Costs of Implementing Animal ID • USAIP estimate - $500 million for first six years (all species included) • Sparks Companies Inc. (cattle only) • Capital investment = $140 million • Annual variable costs = $108 million

14. Estimated Costs at the Cow/Calf Producer Level Annual Cost/Cow Source: Blasi et al. Size of Cow Herd

15. Estimated Annual Costs for a RFID Feedlot Operation Annual Cost/Head Source: Blasi et al. Number of Head

16. Who Will Benefit from the Implementation of Animal ID Systems? Survey results for leaders of state cattle producer associations taken from Bailey and Slade.

17. Producer and State Veterinarian Attitudes • Desire flexibility – want market solutions rather than mandates • State veterinarians – see animal ID principally as a critical need for animal disease control • Most positive perception by both supporters and non-supporters of the USAIP (NAIS) relates to its ability to control animal disease • Supporters of the NAIS had a more positive perception about its ability to aid in assuring food safety and preserving international markets than did non-supporters • Non-supporters believe that downstream firms (packers and retailers) will benefit more from animal ID programs than producers • Issues relating to additional liability that might be passed on to producers have not yet been fully addressed. This may help explain the reluctance on the part of some producers to support the NAIS

18. Summary and Conclusions • Animal ID is a controversial issue • Significant questions about animal ID need to be answered • How liability will be shared • How costs of implementation will be shared • Appropriate technologies • Despite these challenges, animal ID programs offer some potential benefits • Controlling animal diseases • Standardizing beef trade in world markets • Expanded niche market opportunities

19. Summary and Conclusions Continued • Precise form in which animal ID will be implemented is still somewhat “cloudy” • A significant commitment to implement animal ID exists on the part of industry and government. This should aid greatly in its success.