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U.S. Animal ID and Country of Origin Labeling : What Are the Emerging Issues? Wendy Umberger Asst. Professor and Extension Agribusiness Economist Department.

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Presentation on theme: "U.S. Animal ID and Country of Origin Labeling : What Are the Emerging Issues? Wendy Umberger Asst. Professor and Extension Agribusiness Economist Department."— Presentation transcript:

1 U.S. Animal ID and Country of Origin Labeling : What Are the Emerging Issues? Wendy Umberger Asst. Professor and Extension Agribusiness Economist Department of Agricultural and Resource Economics Colorado State University APHIS VS Careers Program, Emerging Issues Raleigh, NC May 20, 2004

2 Presentation Overview Why do we need a National Animal ID System (NAIS)? Importance of U.S. Animal ID System to Private Markets Animal ID vs. Country-of-Origin Labeling History of U.S. Animal ID Movement Implementation of NAIS

3 Why Do We Need Animal ID? Traceability Enhanced disease preparedness Reduce the financial and social impacts of animal health incidents Gain market access and increase consumer demand Promote continued confidence in animal products

4 What are Traceability (TA) Systems? Traceability: Ability to trace the history, application, or location of that which is under consideration. (ISO, 2000) Traceability/ Product Tracing: The ability … to identify for any food product … where it came from, how it was changed by the producer (if appropriate) and where it was sent to. (CCFICS) Identity Preservation: Maintaining product integrity throughout production and processing cycles of a food system.

5 Disease Preparedness ID is critical to trace animals quickly to minimize disease spreading Knowledge for traceback to limit exposure and introduction of disease –Location (Premises) –Date entering and leaving premises –All animals and premises that had contact with a foreign animal disease Traceback is not currently possible!!!

6 Examples of Disease Eradiation, Control and Certification Programs Tuberculosis Brucellosis Scrapies Pseudorabies Johne’s Disease Exotic Newcastle Disease

7 Financial and Social Impacts? Without it we have potential destruction of large numbers of animals –Financial costs associated with destruction of animals and time spent attempting to trace animals –Social impacts Human health Animal welfare concerns –Environmental impacts

8 Health and Safety Traceback Without National Identification All herds involved may be quarantined and tested Packing Plant Feedlot Backgrounders, Auction Marts etc. Herds of Origin

9 Health and Safety Traceback With National Identification Less quarantining, testing and market disruption - Packing Plant - Feedlot - Herd of Origin Backgrounders Auction Marts etc.

10 Maintaining Market Access In the U.S. and Export Markets Countries with national ID –Europe, Australia, Canada, Japan Countries implementing ID –Brazil, Argentina, Uruguay, Mexico

11 US Beef Export Market About 10% of production Japan32% Mexico26% S Korea24% Canada10% 30 other 8% High quality and high value beef Variety meats and hides (70% of tongues are exported) 82%

12 Public vs. Private Goods Traceability systems have been implemented for different reasons and at different speeds –EU – public health issue = public good = regulatory requirement –US – market issue (willingness to pay) = private good = private marketing chain decision Determining the role of the public and private sectors depends on –Type of public goods (public role) and –Demand for private goods (private role) that can be generated with TA Also depends on the credibility of each sector Source: Bailey, D.

13 Domestic Market: Motives for Establishing Traceability Differentiation of foods with “credence” attributes = Market Aspects  Credence attributes are typically content or process attributes which consumers may value, but that are impossible or difficult for consumers to detect: dolphin-safe tuna fair-trade coffee organic meat country-of-origin Non-biotech corn oil  Traceability helps to verify the existence of these attributes- preserves the identity  Create value from these attributes

14 The Depth of Traceability System Depends on the Attributes of Interest

15 Possible Public Goods Animal disease control and eradication Bio-security issues

16 Is Traceability a Private Good? Do U.S. Consumers Value Traceability???

17 As Income Changes, Consumer Preferences About Food Change Tastes GoodVariety Nutritious, Safe, Affordable Convenient Promotes Health Living Well Status/ Causes  Income  Source: Jean Kinsey "The Changing Global Consumer". Presented at the 2000 IAMA World Food & Agribusiness Congress. Chicago, IL.

18 Dickinson and Bailey Held Experimental Food Auctions in the US, Canada, Japan, and the UK (2002): Each participant provided approximately USD $15 in local currency and a “free” lunch with a baseline sandwich Subjects were told that the baseline sandwich met current standards for food safety enforced by their government Subjects allowed to place bids to exchange their baseline sandwich for a sandwich identical in every way except for certifications about different meat characteristics Source: Dickinson, D.L. and D. Bailey. “Meat Traceability: Are U.S. Consumers Willing to Pay for It?” Journal of Agricultural and Resource Economics. 27(2) (2002):

19 Alternative Sandwiches Sandwich 1 – offered assurances about the humane treatment of the animals used to produce its meat Sandwich 2 – offered extra assurances about testing for the sake of food safety Sandwich 3 – indicated that the animal used to produce the meat could be traced to the farm from which it came Sandwich 4 – combined attributes of Sandwiches 1-3

20 U.S. Average Premiums for Beef and Pork Attributes (Dickinson and Bailey)

21 Private Goods – What Are Consumers Willing to Pay for? Bids were higher for meat with all three combined characteristics than for meat with only one characteristic –traceable system can track multiple characteristics Traceability alone is less valued than either food safety or animal welfare in the US and Canada There was no significant difference in average bids for individual characteristics in the UK and Japan Suggests traceability equally as valued as the other characteristics in markets that had experienced BSE by the time the auction experiments were held – profitable markets for TTA already exist in these markets How has this changed since BSE discovery in Alberta and Washington? Source: Dickinson, D.L. and D. Bailey. “Meat Traceability: Are U.S. Consumers Willing to Pay for It?” Journal of Agricultural and Resource Economics. 27(2) (2002):

22 What is Mandatory COOL? Title of the 2002 Farm Bill Retailer shall inform consumers at the final point of sale of the country of origin of covered commodities. Born, raised and slaughtered Exemption for food service Shall not use a mandatory identification system

23 The Controversy: Labeling of Country-of-Origin? U.S. Origin… Meat Must Be Exclusively From Animals  Born, Raised, and Slaughtered (Processed) In U.S. Also includes beef from animals born and raised in Alaska or Hawaii (transported for no more than 60 days through Canada to the U.S. for slaughter) What about feeder animals from Canada or Mexico that are finished in U.S.?

24 Mixed Origin and Blended Origin Meat Labeling Mixed Origin = Products with an origin that includes production steps (e.g. born, raised, slaughtered) that occurred in more than one country, including the U.S. –Ex. “Product of Canada, Raised and Slaughtered in United States” Blended = different products of different origins that are combined for retail sales with no material change –Ex. Ground beef – “Product of Australia; Product of Mexico, Raised and Slaughtered in U.S.A.; Product of U.S.A.;”

25 Umberger, Feuz, Calkins, & Sitz, “Country-of- Origin Labeling of Beef Products: U.S. Consumers Preferences.” 273 Consumers in Denver and Chicago Surveyed on WTP for COOL Hamburger and Steak Experimental Process- paid $50 to participate Bid on Labeled & Unlabeled Steaks 19% Premium for “USA Guaranteed”

26 Consumer Research on Beef: Important Food Characteristics Loureiro and Umberger, 2002 Extremely to Very Desirable 1.Fresh 2.Food Safety Inspection 3.High Quality 4.Lean 5.Visual Presentation Very to Somewhat Desirable 7.Source Assurance 9.Beef Raised in your region of the country Umberger, Feuz, Calkins & Sitz Extremely to Very Desirable 1.Fresh 2.Food Safety Inspection 3.Color 4.Price 5.Leanness Very to Somewhat Desirable 9.COOL 11.Source Assurance 13.Beef Raised in your region of the country

27 Consumers’ Rationale for Preferring COOL (75 % Preferred Labeled, 22% Indifferent) Safety and Health of Meat, 45% –U.S. better regulations and standards –Mad Cow Disease More Information (Awareness of conditions, Identify meat if Outbreak Occurs), 32% Support Producers 21% Location (Prefer from certain countries, Learn about countries), 12.5% Quality of Meat Higher in U.S., 11% Freshness of Meat Closer to Home, 4.5% Source: Umberger, W.J., D.M. Feuz, C.R. Calkins and B. Sitz. “Country-of-Origin Labeling of Beef Products: U.S. Consumers’ Perceptions.”, 2003 FAMPS Conference Paper:

28 Relative Value of Beef Attributes (Loureiro and Umberger, 2003 U.S. Survey) Source: Loureiro and Umberger “Consumer Attitudes toward Country of Origin Labeling in the U.S.” Working Paper, Department of Agricultural and Resource Economics, Colorado State University.

29 Whom Do Consumers Trust to Make Certification? 2 Studies conducted in the U. S. Bailey and Liddell, 2003 Loureiro and Umberger, 2003 (US)

30 US Relative Frequencies for Most Trusted Agencies to Conduct Specific Certifications (Bailey and Liddell)

31 US Relative Frequencies for Least Trusted Agencies to Conduct Specific Certifications (Bailey and Liddell)

32 Who Do Consumers Trust to Certify? (Loureiro and Umberger)

33 Possible Reasons for TA Systems in U.S. Livestock Systems Animal Disease Control and Surveillance Consumers are becoming more concerned about the inputs used to produce food –BSE, GMOs, animal welfare, environmental preservation, etc. Competitors may be able to successfully differentiate food products based on TTA Domestic and foreign consumers may be willing to pay for TTA and a market opportunity may be lost if U. S. systems aren’t developed

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35 National Animal ID Movement 12/31/2003: Secretary Veneman states USDA will begin immediate implementation of a verifiable system of national animal ID. 1/20/2004: Sen. Specter, R-Pa., and Sen. Leahy, D-Vt., introduce the National Farm Animal Identification and Records Act requiring USDA to track movement of any animal within 48 hours. –National-tracking system for all U.S. livestock be up and running 90 days after bill becomes law. 1/31/2004: Veneman announces $47 mil for 2005 to prevent BSE –Accelerated development of National ID system –Sample collection, advanced research, monitoring and compliance

36 National Animal ID Movement April 27, 204 Veneman announced framework for implementation of National Animal ID System (NAIS) $18.8 mil transferred from USDA Commodity Credit Corporation (CCC) to fund program in FY2004

37 September 29, 2003 Developed by: National Identification Development Team “A cooperative effort of industry and government” Draft Document for 2003 USAHA Presentation/Discussion

38 Who has been working on the USAIP? “A cooperative effort of Industry and Government” National Animal Identification Development Team –Formed by USDA – APHIS – 1/2003 –~ 100 animal industry professionals and animal producers from 70 associations, organizations and government agencies

39 USAIP Background Provides Direction to USDA’s APHIS Motivation –Protect US animal health –Potential food safety concerns and biosecurity –Maintain and Gain Access to Markets Each animal will have a lifetime ID# Unique Premise ID for livestock operations Encoded and/or a radio frequency ID tag (RFID)

40 Foundation 48 Hour Traceback Fundamental to controlling any disease threat –Identify individual animals or groups, –Premises where they are located –Date of entry to and from premises –Date of exposure or introduction to disease –ID of all animals on premises at time of exposures –Ability to retrieve that information within 48 hours of confirmation of a disease outbreak

41 National Premises ID System Provides a nationally unique number for each premises (location) involved in animal agriculture 7-character ID States to define and identify premises using national “premises allocator” to assign number Example: A123R69

42 What is a ‘Premises’? “ A premises is an identifiable physical location that, in the judgment of the State Animal Health Official or Area Veterinarian in Charge, and when appropriate in consultation with the affected producer, represents a unique and describable geographic entity (where activity affecting the health and/or traceability of food producing animals may occur) or represents the producer contact location when extensive grazing operations exist.” - (Section III.A.1, USAIP)

43 Premises System State Premises System Premises Allocator A23L449 National Premises Repository A23L449

44 Individual Animal Tracking Between Premises A23L DW31 Livestock Auction SB3T552

45 Proposed System for Cattle Animals RFID tagged before leaving the farm of origin, the initial premise Tag read every time animals change premise 4 Pieces of information: 1.Animal ID # 2.Premise # that animal is leaving (ex. cowherd) 3.Premise # that animal is entering (ex. auction market) 4.Date and time of transfer (when it arrives at the auction)

46 Implementation Stages: Beef

47 Examples of EID Tags

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49 Confidentiality Agriculture is to be designated as a critical infrastructure. –All critical infrastructure information required by the USAIP is to be protected from public disclosure. Procedures and processes will be established at the federal and state level to protect the integrity and confidentiality of all information that an owner or custodian of livestock is required to file on their premises and/or livestock as a specific requirement of the USAIP.

50 Implementation in 3 Phases 1.Implement National Premises allocator and repository in USDA Evaluates current federally funded animal ID systems Flexible system allowing producers to utilize current systems or adopt new ones Technology neutral system so existing and new technologies can be used Developed on USAIP’s data standards System which can be used with production management systems and market incentives System must not unduly increase role and size of government

51 Implementation in 3 Phases 2.Implementation of Animal ID system at the regional levels for one or more species Communication and education effort Address regulatory needs Work with Congress on legislation and future funding

52 3.Selected Animal ID system scaled up to national level Selection of data repository Cooperative agreements with states, Indian tribes, and other government entities to adapt existing systems to new system. Implementation in 3 Phases

53 Management Quality Assurance Programs Branded Products Marketing Opportunities Individual Animal Identification Country of Origin Labeling Source Verification Process Certification

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55 Questions To Be Answered What are the risks: Legal, Financial, Market, Production, Human??? Data/information will likely have value –Who will own it? Current owner of cattle owns current data Current owner have access to data of previous owner? Final owner have access to data of previous owners? –Will it be shared? –Will it flow up and down? –Will it become a marketing tool?

56 What Data Should be Collected? APHIS’s Data Needs/Wants To record certain events –Birth (exact reporting requirements not determined yet – date vs quarter vs year, etc). –Official tests/vaccinations related to program diseases, such as brucellosis, TB, pseudorabies (already required to be reported) –Interstate movement –Changes of ownership –Intrastate movement –Movement through markets –Slaughter

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59 Kevin Dhuyvetter and Dale Blasi: Web-based spreadsheet to calculate RFID costs.

60 Costs Decline with Herd Size Kevin Dhuyvetter and Dale Blasi: Web-based spreadsheet to calculate RFID costs.

61 Uncertainties Associated with Mandatory Animal ID Costs of system? –$100 million annually to maintain Ability to maintain tags throughout production? What happens once the hide is gone? Sharing of the costs vs. benefits in the food supply chain? –What is the ROI? Liability issues? –Producers no longer invisible participants in the marketing channel Change in market structure?

62 Summary COOL is Neither Traceability nor Individual Animal ID Consumers value both COOL and Traceability, but what they appear to really want is traceability. COOL probably won’t go away US Animal ID is inevitable Must be standardized system Animal ID is necessary for market access

63 Summary Consumers’ needs and wants should play a dominant role in food production. However the needs of each member of the food system must also be met for the system to exist and to function efficiently.


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