ROD SMITH, Feedstuffs Staff Editor

DENVER, COLO. -- Country-of-origin labeling (COOL) will cost the entire beef industry and threaten the survivability of family farms and smaller ranches, according to veteran beef industry observer Andy Gottschalk at Hedgersedge.com here.

Gottschalk, in an interview with Feedstuffs at his market advisory firm in Denver, said beef cattle producers who have pushed for COOL have made a boogey man out of the least of their market problems -- beef and live cattle imports, which he said are so inconsequential that the effect of COOL will be that beef producers will lose far more in the marketplace than they will gain.

He said while one wants to disregard the champions of COOL and focus on producers who are involved in moving their industry forward, the damage that COOL will do to all producers is just too great to wave off the rule. He said forward-looking producers and established trade associations need to come to the table and make sure that legislators understand why COOL will take beef off the table.

COOL was written into the 2002 farm bill by legislators responding to producers who have organized around popular issues, including competition from imported beef and cattle (Feedstuffs, April 29, 2002). The law requires that all beef, lamb, pork and seafood and certain other commodities be labeled at retail as to their country, or countries, of origin and that the labeling will be mandatory Oct. 1, 2004. The law does not cover foodservice.

A voluntary COOL program was implemented last year (Feedstuffs, Dec. 2, 2002).

The law will be carried out by the Agricultural Marketing Service (AMS) of the U.S. Department of Agriculture, which wrote the voluntary rule and is now writing the mandatory rule based on comments on the voluntary version.

Arguments for COOL are 'flawed logic'

Gottschalk said the almost-cult idea that beef and cattle imports are adversely affecting cattle prices for U.S. producers overlooks the fact that pork and poultry production, especially chicken production, is the real threat in the market.

He said beef production from non-imported sources has increased 4.5 billion pounds since 1990, while pork production has increased 4.4 billion pounds, chicken and turkey production have increased 14.7 billion pounds and pork and poultry combined have increased 19.1 billion pounds (Figure).

Against this, imported beef -- factoring in beef produced from imported cattle -- has increased just 1.3 billion pounds, he said (Figure).

"This 1.3 billion pounds is what COOL is all about," he said, even though beef's competition from pork and poultry has increased 15 times more than has imported beef.

Gottschalk said COOL will be costly but said trying to estimate that cost for everything that will be required from the cow herd to the plant and retail store to separate, document and verify country of origin is misallocating energy. "We have no model anywhere in the world as complex as this," he said.

Instead, producers need to focus on the fact that there will be direct and indirect costs, he said. There will be direct costs for compliance and lower cattle prices as costs are passed back to producers, he said.

There will be indirect costs as costs are passed forward to consumers, which will decrease demand for beef as consumers turn to less expensive competing meats, especially chicken and turkey that are not covered by COOL and won't have COOL expenses.

Gottschalk said producers who are being told consumer surveys show consumers will pay higher prices for U.S.-labeled beef are being misinformed because consumers in no way will pay enough more to compensate for the costs and because consumers do not act the way they talk.

A survey can ask consumers if they prefer beef, "and beef wins every time," he said, "but look at what they buy, look at how much chicken production has increased" in the last 12 years. Consumers prefer protein that's competitively priced, he said, and to argue otherwise "is flawed logic."

Indeed, if all beef is labeled as to country of origin, U.S. beef will become more of a commodity, and beef from other origins will become more premium-commanding niche product, he said. "If everything in the meat case is Certified Angus Beef, it wouldn't mean anything. The same will happen to a U.S. label."

He said the better route would be to keep COOL voluntary so that specific groups of producers who want to produce U.S.-labeled beef can produce that label, and specific groups of consumers who want and will pay premiums for U.S.-labeled beef can buy it.

Otherwise, the consequences will be damaging, Gottschalk said. Beef demand will drop, he said, and beef prices will have to be decreased to move beef, affecting cattle prices. This will cause more consolidation and integration and leave beef cattle production in the hands of fewer and larger producers.

"It's a classic law of unintended consequences," he said, "as a law written to save family farms will cost more family farms."

©2003 Feedstuffs, Miller Publishing Company.