Editor’s Note: This article was originally written by agricultural economist John Nalivka, president of Sterling Marketing, Inc., in November 2001. His analysis of market fundamentals and the unintended consequences of mandatory country-of-origin labeling (mCOOL) remains directly applicable to today’s policy debate.
The proposed law would only require that imported meat, not U.S. beef, be labeled. Wouldn’t it be easier to just voluntarily label beef from cattle born, raised, slaughtered and processed in the U.S. under the approved voluntary “Made in the USA” label? This strategy would allow beef produced in the U.S. to stand out from any other meat that is in the meat case and if consumers actually prefer it, then they will purchase it!
Mandatory (legislated by the Congress and regulated by the bureaucracy) country of origin labeling (mCOOL) for meat has once again been attached to farm legislation. Events regarding food safety and the recent terrorist attack and anthrax scare might give many consumers pause to consider the benefits of a law requiring country of origin labeling. At the same time, many cattlemen regard this as necessary legislation in order to satisfy the consumer’s right to know the origin of meat sold in the U.S. However, as with most legislation, many of the important, and at times detrimental, consequences are often unforeseen and the good intentions of the advocates are lost in the final law. Consequently, aside from not achieving the initial intent, the outcome is often harmful. This is the problem with mCOOL.
While a program of voluntary labeling is certainly appropriate, particularly in a market environment where branded products in the meat case are gaining popularity with consumers, the entire idea of one more regulation in an already over-regulated industry is neither appropriate nor necessary. Legislation concerning country of origin labeling involves global trade, an increasingly vital as well as contentious issue to the beef industry. It is important to look at the important role that beef imported into the U.S. plays in the industry and to consumers.
In 2000, the U.S. imported just more than 3 billion lb. of beef, a record quantity that accounted for 10% of the total supply of beef. Of this total imported beef, 55% is from Australia and New Zealand. Of that 1.7 billion lb. coming from “down under” about 85% is grinding beef used to produce hamburger and other processed beef products. This is important in the debate because while the U.S. produces mostly high quality grain-fed beef, the available supply of domestically produced beef used to make ground beef is often inadequate to meet the demand of America’s favorite fast food — hamburgers.
That is not to mention the 50% of at-home beef expenditures accounted for by hamburger! For the remainder of imported beef, Canada accounts for 30% of the beef shipped into the United States. The beef coming into the U.S. from Canada represents about 3% of our total supply and includes boneless grinding beef as well as beef cuts. In 2000, Americans consumed a record 28 billion lb. of beef equating to 70 lb. per person for the year. Last year marked the second consecutive year that beef demand showed a marked improvement following two decades of decline and a significant loss of market share to pork and poultry. Of that 70 lb., nearly 50% (32 lb., or the equivalent of 128 quarter-pound burgers) was consumed as ground beef.
This is where the largest share of imported beef comes in. While the U.S. beef industry supplies 70% of the raw material to meet the demand for ground beef, the remainder has to be filled by imported grinding beef, primarily from Australia and New Zealand. This hamburger is sold in fast food outlets as well as retail stores. Though imported beef represents 30% of the total grinding beef supply consumed in the U.S., it accounts for only 10% of the total beef consumed. Frozen, grass-fed beef from Australia and New Zealand serves to complement, not substitute for U.S. domestic grinding beef sources used in the manufacture of lean processed products. Regulatory activity involving labeling is a complex issue and one not to be taken lightly nor placed in a highly charged political environment like the current farm bill debate.
The questions that need to be asked include:
- Is the perceived consumer benefit going to be realized and are consumers willing to pay more for meat at the retail counter to justify it? Who will ultimately pay the price – producers, processors or consumers?
- Is the intent of the proposed law to slow imports by differentiating the product and affecting demand? This is a slippery slope to embark upon. The result may be just the opposite than that which is intended. The key to maintaining the course of improving demand and gaining market share is promotion.
- How much beef is being talked about and what kind of beef is it? Remember most of the imported beef is used to make ground beef.
- As the nation’s cattle herd continues to decline toward 30-year lows, the cost of domestically produced grinding-type beef will increase significantly. It has already increased about 6% during 2001 even in the face of a 4% increase in beef imports.
- Does labeling of imported beef imply a food safety problem? It had better not. Not only is food safety not an issue with beef imported from Australia and New Zealand, but also, by implying there is an issue, consumers may not differentiate between domestic and imported beef and instead, reduce consumption of all beef.
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