Nuts 'n Bolts

by Shane Sadorski

It’s October, and that means mandatory Country of Origin Labeling (COOL) is now in effect in the U.S. for the beef supply chain. Packers, processors, and retailers in the U.S. now have a 6 month grace period to adjust their business operations while the USDA conducts an ‘education campaign’ to bring industry players into line with the new rules.

As expected, the immediate impact for Canadian cattle producers has been mixed, thanks to the USDA’s flexible rules on the commingling of cattle and beef.

While some packing plants in the U.S. have already announced they are shifting their production to U.S.-only, and are closing their doors to Canadian and Mexican cattle, other packers are saying they intend to use the ‘multiple country of origin’ label instead (Product of USA, Canada & Mexico) and are continuing to buy cattle from Canada.

What is happening is that each individual packer and plant is putting pen to paper, looking at their supply, production costs, and marketing plans, and deciding which label is the best one for them. It will take a few more months until all the dust settles and we know who is running what label – and therefore who is buying Canadian cattle.

At this point, things are going as well as can be expected under the circumstances. Soon, there will be both ‘U.S.-only’ and ‘multiple-country’ products on American store shelves, and U.S. consumers will have their say with their purchasing dollar. While demand for Canadian cattle is expected to drop and a discount is already being seen, Canadians aren’t shut out of the U.S. market entirely - for now.

Unfortunately, there is a scary cloud hanging over the horizon that threatens to make things worse.

If there was any doubt (which there wasn’t) that the push for country of origin labeling had nothing to do with consumer choice and everything to do with the politics of putting up a trade barrier to Canadian cattle, that doubt has completely disappeared in the last few weeks.

Already, a third of the U.S. Senate has written to the USDA complaining about the flexibility the USDA has given packers under COOL. Among a whole laundry list of complaints, they are upset that some U.S. packers plan to use only the ‘multiple country of origin’ label and run U.S. cattle through along with foreign cattle. “That’s not what we intended when we passed COOL,” say these senators, led by Ag Committee Chairman Tom “Ethanol Man” Harkin out of Iowa. So much for allowing consumer choice.

So far, the USDA administration has held pretty firm on allowing packers the right to co-mingle their cattle and run just one ‘multiple country’ label. But there are some signs that USDA might be starting to back down. A recent USDA clarification of the rules on COOL now states that packers can label meat from U.S. cattle as ‘multiple country’ only if the plant also processed some foreign cattle on the same production day. To avoid having to use a second U.S.-only label, packers have to ensure that some non-U.S. cattle get mixed in with U.S. cattle. Not that big of a deal to some, but it is still one more administrative burden for those packing plants buying Canadian cattle.

But more importantly, what this signals is how shaky the current USDA regulations are. A sudden ‘change of heart’ at the USDA can easily change the existing rules to the point where it becomes totally impractical for any U.S. packer to buy non-U.S. cattle. That change of heart would come in the form of a new Secretary of Agriculture at the helm of the USDA, and it is the President of the United States who appoints the Secretary of Agriculture.

And by the way, who are two of the 31 senators who signed Harkin’s complaint letter about COOL?

Presidential nominee Sen. Barack Obama and Vice-Presidential nominee Sen. Joe Biden.
Hang on to your hats. This ride could get a whole lot bumpier come November 4th.