Beef Market Advisor

Friday, October 31, 2003

Subject: COOL Questions Via a Canadian Email.

?______, You ask who is driving the COOL?law. It is the rank and file rancher that has seen those semi loads of Canadian cattle coming south for years -- especially in those years when U.S. beef prices were low. ?Selected ranchers in North Dakota, Montana, South Dakota, Idaho, Wyoming, Nebraska and?also rank and file?ranchers in many, many other states are supporters. R-Calf has hung it's organization's reputation on the issue of "imports."? NCBA, on the other hand, ?is not in favor COOL.

South Dakota's two senators are leading the Congressional charge.? It hard for politicians from ranching states to not be behind COOL.

It is important to note that COOL law covers a lot more than just beef. It also covers pork, peanuts and many non-meat commodities. It does not cover poultry -- don't know why.

You ask about consumers reaction.? I do not think that consumers are really very concerned about this. They are concerned about health issues and I think their attitude is that if this will help insure better health issues, fine. You say consumers will be stuck paying for this. Not necessarily. If consumer demand does not go up with COOL, the costs will be passed down to ranchers.

You ask how is Canadian beef going to be segregated at all levels of the marketing system.?As the law now stands, Canadian beef (in fact, all beef, U.S. and imported) ?will have to be identified at each marketing step. It will need to be segregated at the feedlot and?processing plant and country of origin maintained.

Hamburger, for example, was required to show percentages by country of origin but the new rules say it has to only list countries of origin in alphabetical order -- a real step forward. Record keeping for potential audit requirements are why the projected costs are so high. It could turn into a record keeping nightmare.
It has been determined?that the law does not allow just tagging and tracking Canadian cattle as?they come across the border. The law is said to require U.S. ranchers to have to verify?the origin of the all cattle sold.?Ranchers will have to maintain records to show where the animal was born and where it was fed and processors will have to verify its country of origin all through processing.?The country of origin will need to be maintained on the package (Not the rancher ID) but if, and when an audit is called for, everyone in the marketing chain? will need to have an audit trail?back to where the calf was born.?The law specifically says that a national ID system can "not" ?be mandated. (I suspect, however, that our national ID system will be?implemented around?health issues and not country of origin law).

To keep imported cattle segregated, I expect that packing plants will segregate Canadian beef out by setting aside certain days to process Canadian beef. I fully expect that while some plants will specialize in Canadian beef, others?will decide to not process imported beef rather than have to shut down, clean up, and start back up again? to process Canadian cattle only to have to shut down, clean up to return to U.S. beef. All of this segregation will add to processing costs and I believe lower rancher prices.

Certain food distribution channels are exempt.??I think the law was targeted toward consumers' meat counter?purchases. Food service establishiments such as salad bars and deli's within retail extablishments are exempt. Not sure why but they are.

Another possibility is that some imported beef (including Canadian beef) could be directed towards food service establishments where is does not require labeling. Iwould expect, however, that this would result in a lower price for imported beef.

The net result of COOL is that I would expect the Canadian/U.S. basis on slaughter cattle and feeder cattle to widen. For now I talk about a $5 wider slaughter cattle basis and a $10 wider feeder cattle basis as a result of COOL; but, I have nothing to base this estimate on as we are plowing new ground.

COOL suporters argue that consumers know where a shirt is manufactured, where a tool is manufactured, etc so why shouldn't consumers know where their beef was produced. They also object to imported beef being marketed under the USDA inspection label which some consumers assume?means it?is American beef.

Some analysts are suggesting that fact that ?about 85% of all beef sold in the U.S. is already of U.S. origin so that the market price potential to differentiate U.S origin beef from imported beef is quite small.? We have never tested this nor has it been researched. Maybe U.S. consumers will even?pay a premium for Canadian beef! We just do not know.

Harlan Hughes
Professor Emeritus
North Dakota State University
email: harlan.hughes@gte.net
Blog page: http://beefeconomics.blogspot.com
Web Page & BEEF Magazine Market Advisor: www.beef-mag.com

posted by Dr. Harlan Hughes 8:26 PM [edit]



According to a recent CanFax weekly summary, movement of Canadian boneless beef to the U.S. continued to increase each week with total volume from September 10 to October 15 at 62 million pounds. The average was about 12 million pounds per week, which was near the 13 million pounds exported weekly in 2002. The border between the U.S. and Canada was re-opened in September after having been closed due to the discovery of BSE. Canadian beef has also begun to move into Mexico.


posted by Dr. Harlan Hughes 3:26 PM [edit]


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