Nobody’s COOL

As cattlemen continue to wrestle over mandatory country of origin labeling, an end might be in sight

If country-of-origin labeling (COOL) was as simple as slapping a stamp on a package of meat to inform consumers where their meat came from it would be easy to support.

There is nothing simple about COOL, however, which is why the beef industry has been on an odyssey since the announcement of the program in 2002 and the implementation in 2008. During the past six years COOL has been a hot topic in U.S. courtrooms and legislatures and around the globe.

The latest developments in 2014 have been confusing, to say the least, but might spell a resolution to the maligned program.

To start the year, Congress went to work on the Agricultural Act of 2014—prime opportunity to repeal COOL. The farm bill was later signed by President Obama on Feb. 7 with no revisions made to the COOL portion of the legislation.

Meanwhile, a coalition of packers and industry groups that had filed an injunction in a federal district court to stop COOL from setting more stringent rules took their case to the U.S. Court of Appeals. On March 28, a three-judge panel for the appellate court reaffirmed the district court’s ruling. A week later, in a startling move, the U.S. Court of Appeals vacated the panel’s decision and set a May 19 court date to examine the lawsuit.

The National Cattlemen’s Beef Association (NCBA) is one of the plaintiffs in the case, and vice president for government affairs Colin Woodall is optimistic about what the latest development could mean to beef producers. "I think having a full bench review of this case is a good thing for us. It shows that there is some concern from the court on just how far this mandatory, government-run COOL program has gone," Woodall says.

Global influences. As it stands now, Mexico and Canada, two of the largest U.S. trade partners for beef, have not appreciated the negative impact COOL has had for their livestock producers. Canada is looking to apply tariffs on imports of U.S. beef and pork, as well as certain fruits, vegetables and manufactured goods.

"There is a long list and it really just depends on which state they are looking at to determine what is on that list," Woodall says.

Mexico hasn’t announced any tariffs that the country could implement, but the meat packing industry south of the border has certainly increased, thanks in part to COOL. Fewer and fewer cattle are coming into the U.S. via Mexico, which makes the already delicate business of feeding cattle even more difficult for feedlot operations like Barrett & Crofoot Feedyards in Hereford, Texas.

"What we’re doing with COOL is continually outsourcing this nation’s Mexican supply of product. It is one of the worst things to happen to our industry," says Bob Barrett, Barrett & Crofoot feedlot owner-operator.

Barrett’s family feeds 140,000 head of cattle with 60% of capacity being filled with cattle from Mexico. Since COOL started, he says he has had a harder time procuring Mexican cattle because demand and prices have increased in Mexico.

Much of that competition was brought on by Mexico’s packing and feeding giant SuKarne. In 2000, according to SuKarne’s website, the company was processing 244,000 head of livestock with nearly $162 million in sales, which was two years before the announcement of COOL. In 2012, the company slaughtered more than 1 million head of livestock with nearly $2 billion in sales.

This group of spayed Mexican heifers at Keeling Cattle Feeders located near Hereford, Texas, is part of the nearly 990,000 head of cattle imported from Mexico in 2013, down approximately 480,000 from the previous year.

Compliance constraints. NCBA’s data indicates feeders that depend on foreign cattle, such as Barrett & Crofoot, have been seeing a deduction of $35 to $45 per head at the packer, and in some instances as high as $60.

"When you do that you put yourself at a disadvantage to selling beef all over the world, because it is costing us $35 a head for every animal we send to the packing plant," Barrett says. "As a producer, it is hard for us to compete with what SuKarne does in Mexico. Couple the production costs as it equates to labor and compliance within the packing sector to meet the requirements of mandatory tracking, segregating and labeling required by COOL and the U.S. comes up short. COOL encourages growth in the feeding business outside this country while the feeding sector of the U.S. shrinks."  

Just down the road from Barrett’s operation is Keeling Cattle Feeders where Scott Keeling has 25% of his 17,000-head feedlot stocked with Mexican cattle.

"I know COOL is going to be a burden. If there are more cattle that stay down there, that will mean fewer cattle are coming up here," Keeling says.

When Keeling takes Mexican cattle to the packer it requires more planning because the plants only process non-native cattle on certain shifts each week. Separating the cattle isn’t a big issue for the packers in the area since there are still many Mexican cattle on feed locally.

However, Keeling sees a problem for producers in other regions. "You go up north, and maybe they don’t have enough for a shift, so there is a lot of separation on the cooler, the chain, everything. That separation comes at a cost to them," he says.

If the next step with the U.S. Court of Appeals fails, it will be up to the World Trade Organization (WTO) to offer some closure.

Ron Plain, professor of agricultural economics at the University of Missouri, thinks the WTO could side with Mexico and Canada since earlier cases involving COOL have been ruled in those countries’ favor.

"I’m expecting for the WTO to rule against us, but that is going to be a long process," Plain says. "The way those rules are set up nothing happens quickly, and there are opportunities to appeal when they rule against you. I’m guessing eventually we’ll probably lose there."

Ultimately, COOL has been about informing consumers, but Plain isn’t so sure the majority will notice.

"For most consumers that I’ve dealt with, they aren’t actually aware that the label is there on the package and they don’t seem to care either way," Plain adds. "I don’t know if at the consumer level it is having much of an impact, but certainly for some consumers they care a great deal about it."

To contact Wyatt Bechtel, email wbechtel@farmjournal.com.