Your Reading List

COOL: Is it good or bad for beef?

The World Trade Organ-ization ruled a few weeks ago the U.S. broke international trade rules when it implemented country-of-origin labelling (COOL) on food products. The Canadian Cattlemen’s Association was one of the main challengers of COOL on behalf of the cattle industry. Arguments against the law made by producer groups stated this was a technical trade barrier. For example, additional paperwork and border delays have been noted on fed and feeder cattle exports to the U.S. since the law took effect.

There were also ideas this law lowered demand for Canadian beef in U.S. grocery stores because of added costs of separation and labelling of meat. Fears that the U.S. consumer would back away from Canadian product and chose locally grown beef also reinforced the trade challenge.

I’ve received a few inquiries from producers on this issue, so thought it would be prudent to discuss how this issue is influencing the beef industry given the current market environment.

We all know beef and cattle prices can be greatly influenced by “non-price” issues. Factors not related to normal supply and demand economics have been known to influence consumer taste or preferences for both U.S. and Canadian beef. The Canadian industry has made considerable progress through the three industry pillars of age verification, premises ID and movement. There is still much work to do to have all provinces on the same page. Full traceability is the goal so a meat recall can be implemented in case there is a problem. These pillars are needed so Canadian beef can enter into other higher-end markets.

A STEP BACK?

Is fighting COOL not taking the industry back to the pre-BSE era? Other products in the U.S. must have be labelled with country-of-origin, and as one U.S. senator stated, “I know where my clothes are made. Shouldn’t I know where my food comes from?”

This sounds like common sense. I also don’t eat food from certain countries. In most developed countries, there is a psychological market preference that assumes locally grown is safer than imported product. This is not because of COOL but just a consumer preference. We can ensure our products meet safety standards for certain markets with the Canadian traceability system and origin labelling.

Many cow-calf producers in Western Canada don’t age-verify cattle, never mind keep records for premises ID. Fighting COOL appears to be appealing to these producers who don’t want to comply with modern industry standards. The most common problem with western Canadian farmers is they don’t realize they are the sellers. Many producers have the mindset the world has to adjust to their production practices. Unfortunately the world doesn’t function that way. The cattle market is a pure competitive market which means producers need to push efficiencies, modernize and lower costs.

Canada Beef Inc., which is supported through a national checkoff and government funds, is promoting the “Canadian Beef Advantage.” Fighting COOL is actually saying there is no Canadian advantage. Are we in fear our product is not as good as our U.S. counterparts? A recent advertisement in a Grainews sister publication, Canadian Cattleman, showed a U.S. restaurant using and promoting Canadian beef largely due to the efforts of this organizations.

Finally, most plants are HACCP certified which means they have full traceability measures in place and they are fully modernized. These are not plants from the 1800s where an individual has to manually write a label. The extra cost for separation and labelling is minimal. I know there were certain plants that stopped buying Canadian cattle. However, given the market conditions, it is difficult to argue prices were discounted at Canadian-friendly U.S. plants.

ON THE OTHER HAND

I’m not totally against industry groups fighting COOL. Under the Bush administration, it appeared that there would be little disruption to U.S. imports of Canadian cattle under COOL. However, when President Obama took over, U.S. Agriculture Secretary Vilsack urged processors to apply stricter rules than the current COOL language otherwise he would impose greater measures through government force. It sounded like, and the fear was, that he was deliberately trying to hinder imports of Canadian cattle.

I believe fighting COOL has tempered this attitude, especially when ground beef prices are at record highs. The U.S. economy has over 30 million people on food stamps. Vilsack would only be hurting his own people causing supply disruptions for a product that is a staple good for many consumers.

I believe there needs to be a balance. Canada is promoting traceability and food safety systems from the farm to processor, which includes labelling. Canadian beef can be an equal or superior product for U.S. consumers. If it is superior, the price will dictate a premium. I believe it is common sense that consumers know the origin of beef and what cattle have been fed.

On the other side, left-wing propaganda to hinder trade has to be halted. Thankfully, the WTO has sided with Canada on COOL and hopefully the Obama administration cools their tone on this issue. Canadian producers can compete on a world scale, but it has to be fair. †

About the author

Columnist

Jerry Klassen

Jerry Klassen is manager of the Canadian office for Swiss-based grain trader GAP SA Grains and Products Ltd. and also president and founder of Resilient Capital, a specialist in commodity futures trading and commodity market analysis. He can be reached at (204) 504-8339 or visit his website at www.resilcapital.com.

Comments

explore

Stories from our other publications