Country-of-origin labeling became U.S. law as part of the 2002 Farm Bill, but the full impact on the pork industry won’t be seen for a few years. Unless something changes dramatically during that time, the long-term outlook is grim.

To start, country-of-origin labeling on certain retail food products is a voluntary program, but it will become mandatory in 2004. Rules for the voluntary program were released in October and state in order for pork to be labeled as U.S. product, the animal must be born, raised and slaughtered in the United States.

It presents a problem for an industry that finishes about 6 million Canadian feeder pigs a year. All Canadian-born pigs will have to be segregated at the packer, and the  meat labeled differently than pork from U.S.-born pigs.

Some type of certification process will have to be implemented as the requirements become mandatory and USDA’s Agricultural Marketing Service enforces the regulations. Retailers ultimately will be responsible for labeling, and all other requirements will flow back through the chain from that point.

“The law requires that a verifiable audit trail is maintained to substantiate label claims. AMS will not issue prescriptive requirements for the processes, systems or documentation that are necessary to verify claims,” says Bill Sessions, associate deputy administrator of AMS’  livestock and seed program. “Retailers and their suppliers have a shared responsibility for establishing and maintaining records that can substantiate claims.”

The ultimate responsibility may be spread throughout the entire food system, but the costs tend to run down hill. Packers and producers could be left footing most of the bill. There’s little doubt that retailers will demand some accountability from processors, who will then look to producers to document their hogs’ origins.

Kirk Ferrell, vice president of public policy for the National Pork Producers Council estimates total cost for all covered commodities could be $3 billion to $5 billion, with costs to the pork industry near $1 billion.

“Consumers will pay the extra costs in the long run, but in the short run the producers, packer/processors and retailers will bear the costs,” says Steve Meyer of Paragon Economics.

As for consumers, there is no data that suggests they want or care about country-of-origin labeling, and expecting them to pay more for U.S. products is probably unrealistic. Consider how often you check for the “Made in the U.S.A.” labels on products you buy.

“Country-of-origin labeling is not even on the consumer’s radar screen,” says Meyer. “This is not a consumer-driven issue.”

That fact becomes important when you consider the regulation was included in the Farm Bill under the guise of ‘the consumers’ right to know’, says Ferrell.

When you think of COOL as a consumer-right-to-know issue, cracks in the regulations begin to show. First, meat retailers will be subject to the regulations, but foodservice will be exempt.

“That’s just some of the regulation’s hypocrisy. If consumers want to know where the meat they buy at the grocery store comes from, wouldn’t they also want to know where the meat they buy in a restaurant comes from?” says Ferrell. “But it would be nearly impossible to track the product in a foodservice setting, so it was exempted.”

Another inconsistency is the one that exempts poultry from the regulations.

“By imposing costs on beef and pork, the program gives the poultry industry a cost advantage,” says Meyer.  

It’s hard to find a solid, “on-the-record” explanation for these exemptions.

The COOL regulations present more potential dangers than increasing U.S. producers’ costs. For example, if COOL causes the market for Canadian feeder pigs to dry up, U.S. producers could be squeezed twice.

Canada has the resources to add finishing space and the slaughter capacity to kill more of its own hogs if the economic incentive to ship feeder pigs south disappears. That would leave U.S. producers who depend on Canadian pigs empty handed. It continues to be difficult to get permits to add sow barns in the United States, so those producers might have trouble finding replacement feeder-pig supplies.

Also, the United States is one of Canada’s preferred export markets for pork. COOL could cause the Canadians to simply ship more pork products south to compete for U.S. consumers.

Even more dangerous, is the prospect that COOL might actually help promote Canadian pork in U.S. grocery stores. Canadian pork carries a positive image of being a quality product. So, it’s possible that consumers might view Canadian pork as a premium item, points out Ferrell.

By mandating country-of-origin labeling, Canadian pork would develop a brand identity, while the U.S. pork industry covers the costs of that brand identity.

“Legislators think that given the choice consumers will choose to buy U.S. products, but there is no data to support that,” says Ferrell.

One way or another, COOL could vastly change the way pork is supplied to the U.S. consumer. If you feel strongly that COOL could add costs or limit your marketing opportunities, it is not too late to make your voice heard. The accompanying sidebar tells you where to go and how to voice your opinion. Without additional industry input, COOL could leave you out in the cold. 

 

The Future of COOL

When country-of-origin labeling became part of the 2002 Farm Bill, it set the wheels in motion for a process of gathering information and opinions that will culminate in the final mandatory regulations.

Guidelines for the voluntary COOL program went into effect on Oct. 11. However, comments regarding the final rules can be submitted to the Agricultural Marketing Service through April 9, 2003.

The voluntary guidelines are on the AMS Web site at www.ams.usda.gov/COOL. You can send your comments on the regulations to: Country-of-origin Labeling Program, Agricultural Marketing Service USDA, Stop 0249 Room 2092-S, 1400 Independence Avenue S.W., Washington, D.C. 20250-0249. You also can fax them to (202) 720-3499 or e-mail to cool@usda.gov.

One of the fears is that retailers will be hesitant to participate in the voluntary program, which will make it more difficult for AMS to develop mandatory guidelines. However, officials stress that they will listen to comments from anyone, whether or not they participate in the voluntary program. Changes may not be easily implemented, even if unanimously requested. To make major changes in the COOL regulations, it would take an act of Congress to amend the Farm Bill.

“For example, a residency provision could be added so animals that remained in the United States for at least 90 days before slaughter could be labeled as U.S. product. That could easily fix many problems for the pork industry,” says Kirk Ferrell, vice president of public policy for the National Pork Producers Council. He doesn’t expect major changes to the regulations.

Another tricky area for AMS is trying to allow for the various industry viewpoints. While NPPC has strongly opposed the COOL regulations, the National Cattlemen’s Beef Association has supported voluntary COOL labeling. It is one of the more divisive issues in the beef industry today, with no clear preference among producers.

Trying to make everybody happy is going to be a tightrope walk for AMS, but it is important that officials have as much perspective as possible before making decisions. Once the regulations become mandatory on Sept. 30, 2004, it will be too late.

 

Perspective from Across the Meat Case

Eventually, country-of-origin labeling regulations will have a profound effect on pork production, but the retailer will feel the initial effects.

“This is different than other USDA programs because it’s enforced at the retail level,” says Mike Townsley, senior vice president of sales and marketing for Premium Standard Farms.

The retailer will not be able to point to the packer – a mislabeled product will not absolve the retailer of responsibility. Fines for violating COOL regulations will not be determined until the mandatory regulations are finalized, but they are expected to be severe.

Townsley expects the regulations will increase producers’ production costs and cause packers to discount Canadian hogs or build extra coolers in order to more easily segregate those carcasses. That in turn would increase their costs, which could be passed on to the retailer and eventually consumers.

“One thing that could absolve the retailer of labeling problems is buying case-ready products. Because the packer applies the case-ready label, he is responsible for accuracy,” says Townsley. “If the mandatory COOL regulations remain the same as the voluntary regulations, it will further accelerate the move toward case-ready products.”

So far, Townsley has not heard of any retailers who have committed to the voluntary labeling program. However, PSF is evaluating its possible involvement. He points out that with PSF’s process-verified program and vertically integrated structure, PSF could likely make the transition to the COOL regulations more easily than other producers and processors.