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‘Impacts of Country of Origin Labeling on North American Beef Trade’ Prepared for the Organized Symposium: ‘Impacts of Country-of-Origin Labeling on North American Trade in Livestock and Meats’. AAEA Annual Meetings Montreal, Canada July 29, 2003 Parr Rosson and Flynn Adcock

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aaea annual meetings montreal canada july 29 2003 parr rosson and flynn adcock texas a m university

‘Impacts of Country of Origin Labeling on North American Beef Trade’Prepared for the Organized Symposium:‘Impacts of Country-of-Origin Labeling on North American Trade in Livestock and Meats’

AAEA Annual Meetings

Montreal, Canada

July 29, 2003

Parr Rosson and Flynn Adcock

Texas A&M University

overview
Overview
  • Provisions of MCOOL
  • Issues
  • Impacts on Beef Trade
mandatory country of origin labeling
Mandatory Country-of-Origin Labeling
  • Retail Labeling of Imported Products
    • Voluntary October 11, 2002
    • Mandatory September 30, 2004
    • Retailer is Responsible for Label
  • Products Included in Regulations
    • Muscle Cuts & Ground Beef (??), Pork (??), Lamb (fresh, chilled, frozen)
    • Seafood and Aquaculture
    • Fresh/Frozen Fruits and Vegetables
    • Peanuts
slide4

Present Provisions

  • Animal Products Labeled as U.S. Only if Born, Raised, and Processed in the United States
  • Requires Label, Stamp, Placard on Package, Container, or Bin
  • Major Exemptions Are:
    • Exports
    • Hotel-Restaurant-Institutional Trade
    • Ingredients in Processed Foods
    • Retail Stores w/Sales < $230,000 & Meat/Fish Markets
present provisions continued
Present Provisions (continued)
  • Specific Provisions:
    • Exclusively U.S. origin
    • Foreign Origin, Entirely Outside United States
    • Mixed Origin, including United States
    • Blended Products, raw materials-Order of Prominence by Weight, not Percent
present provisions continued6
Present Provisions (continued)
  • State & Regional Programs
    • State & Regional Labeling Claims Cannot be Accepted in lieu of labeling
  • Retention of Records
    • Two Year Records Retention Policy
    • ‘Maintain Auditable Records Documenting Origin’- Retailers & Down-line Suppliers
issues
Issues
  • Consumer Preference is Unclear
  • Who Will Bear Start-Up Costs Looms Large
  • Contradiction: Secretary Prohibited from Implementing Mandatory ID System
  • BUTLaw Interpreted to Require Verifiable Audit Trail for 2 Years, Raising Concerns About Traceback of U.S. Cattle & Hogs
  • Higher Costs of U.S. Beef : Damage Competitiveness w/Poultry, Imported Products
issues continued
Issues (continued)
  • USITC Found that U.S. Buyers view U.S. and Canadian Cattle As Interchangeable
  • 70% of Meat from Mexican Cattle Enters

H-R-I Trade

  • Survey Results Inconclusive as to Consumer Preferences
  • Some Foreign Firms & Commodity Assns. May View MCOOL as an Opportunity
  • De-Funded for FY 2004 in Ag Appropriations Bill (U.S. House)
mcool cost estimates
MCOOL Cost Estimates
  • USDA/AMS Estimates First Year Compliance Costs at $1.97 Billion
  • Other Estimates Up to $6 Billion
  • Who Bears Costs – Producers, Wholesalers/Feedlots/Packers, Retailers, Consumers?
mcool beef
MCOOL & Beef
  • Beef Product & Beef from Imported Cattle Represent 17.9% of Total Beef Consumption
  • Distribution of Beef Imports (5 Billion Pounds):
    • 53% HRI
    • 27% Processed or Re-exported
    • 20% Retail, 1 Billion Pounds (3.6% of Consumption)
  • 5.6 Billion Pounds of U.S. Beef Sold at Retail
potential impacts u s products perceived as having more value
Potential Impacts‘U.S. Products Perceived as Having More Value’
  • U.S. Product Differentiated from Imports
  • U.S. Product Would Sell at a Premium Relative to Imports
  • More Product Would Stay in the U.S., Exports Fall
  • Opportunties for Foreign Products Possible in 3rd Country Markets
potential impacts foreign products perceived as having more value
Potential Impacts ‘Foreign Products Perceived as Having More Value’
  • Imports Differentiated
  • Imports Sell at Premium in U.S. Market
  • U.S. Imports Would Increase
  • U.S. Exports Increase
potential impacts u s consumers are indifferent
Potential Impacts ‘U.S. Consumers Are Indifferent’
  • Price Sensitive & Competitive Market
  • U.S. Product Would Have No Premium Relative to Imports
  • No Major Market Shifts
  • U.S. Producers Incur Increased Costs of Labeling
potential impacts new supply chains
Potential Impacts(New Supply Chains)
  • U.S. Product Incurs Higher Costs Due to Tracking/Segregation/Labeling
  • Development of Specialized Export Oriented Supply Chain to Service U.S. Market-Replaces Mixed Origin Supply Chain: HRI and/or Retail
  • Likely to Occur in Canada, Maybe Mexico
  • Imports Replace Some U.S. Product at Retail-Exports to Canada/Mexico Fall
potential impacts disruption of north american market integration
Potential Impacts(Disruption of North AmericanMarket Integration)
  • Some Retail Groceries Refuse to Market Beef Labeled as ‘Product of Mexico’
  • Packing Plants Reduce Demand for Mexican Cattle
  • Feedlots Limit Purchases of Cattle from Mexico
  • Lower Imports of Mexican Feeders & Price Discounting
  • Increased Beef Supplies in Mexico & Lower U.S. Exports
summary and conclusions
Summary and Conclusions
  • Canadian Cattle Segregation in Feed Lots & Slaughter May Spur Specialization in Export Products
  • Mexican Cattle Likely Discounted
  • MCOOL May Spur Retaliation by Trading Partners
  • MCOOL Viewed by Some as Government Mandated Market Segmentation
summary and conclusions20
Summary and Conclusions
  • Some Countries May Respond by Developing Market Differentiated Beef Products
    • All Natural, Grass Fed, Premium Beef
  • Potential to Serve U.S. Hispanic Oriented Supermarkets with Mexican Beef
  • U.S. Cattle Sector Facing Higher Costs & Loss of Competitiveness
  • North American Market Integration Disrupted, Reducing Efficiency
implications
Implications
  • Record Keeping & Traceback, if Required, Will Be Major Cost Factors for U.S. Cattle & Hogs
  • Shelf Space at Premium & High Degree of Competition Among Retailers, So Cost Passed Back to Production Sector
  • U.S. Retailers & Packers May Reduce Number of Countries Supplying Products
  • Canadian Suppliers in Good Position to Respond to Market Opportunities
  • BSE Discovery in Canada Provides Support