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R-CALF & Activists Hatch Perfect Poultry Industry Assistance Act (PIAA) PDF Print E-mail
Written by Steve Dittmer   
Thursday, 05 July 2007
AFF Sentinel Vol.4#22

What could be a better boost for the poultry industry than something that mandates huge costs on red meat production chains and damages the cost competitiveness of red meat, but not affect poultry's costs at all?

Well, R-CALF and its activist LAG* allies have devised the perfect Poultry Industry Assistance Act. It's called mandatory country- of-origin labeling - mCOOL. While the red meat production chains, from birth to the retail case, would need a major logistics overhaul and incur huge expenses, poultry is exempt.

Meanwhile, R-CALF's Bill Bullard chants his mantra that there "is an easy way to implement COOL without burdening the U.S. cattle industry," and "... it's been tried and proven with fish and shellfish." Retailers beg to differ on seafood mCOOL.

"Mandatory COOL for seafood is failing to deliver the benefits promised by the law," a Food Marketing Institute (FMI) report said. "It has not increased sales of U.S. seafood." FMI is the major trade association representing the nation's retail groceries. But it is the 2.5 years of experience with the true costs of mCOOL that are the most revealing. FMI President and CEO Tim Hammonds contrasted the actual cost of mCOOL with USDA's first-year estimates in a case study of 1,000 retail stores.

USDA had estimated costs per retail store at $1,530. The FMI case study showed the actual cost range to be $9,000-$16,000 per store, some 6-10 times the USDA estimate. Keep in mind, USDA was in uncharted territory; we've never attempted anything so complex.

Even more startling were the figures for supplier companies - somewhat analogous to beef processors. The USDA estimate was $1,890 per plant. FMI found the actual cost to be some 105 to 130 times the USDA estimates - $200,000-$250,000.

That figure is more intimidating when one takes into consideration major differences between seafood and beef. Much fish is sold either whole or cut into two fillets. We polled industry experts and they calculated a range of 200-400 individual packages, with the recognized industry expert calculating 294 from a beef carcass, each package of which needs to be tracked, labeled and its verification auditable. Many shellfish are sold whole in boxes - 12 or 24 in a box. So the complexities of beef far exceed that for seafood.

We're guessing that the average Big Four beef plant volume is much larger than the average land-based fish processing facility, and it is easy to see major beef packing plants spending many millions of dollars to comply with the law.

USDA had estimated total costs for the beef chain at over $2 billion. The agency did not include the structural and logistical line and storage costs, data storage, training or other costs. Using the per head costs estimated by the Sparks (now Informa Economics)/Cattle Buyers Weekly in-depth study for packer/processors of $15-$18 per head, the average 5,000-head per day plant could spend $21-$25 million for each plant. If FMI's seafood experience transferred to beef, and suppliers spent many times more than such estimates to comply, the costs would be astronomical. Sparks/CBW estimated the whole chain would spend $1.5-$1.7 billion (2003 dollars), compared to USDA's $2.4 billion, although USDA's estimate did not include as many costs. If multipliers kick in, the beef chain could find itself absorbing enormous costs, turning the competitive cost equation with poultry into a joke.

And mCOOL could also upset the retail/foodservice equation. Retailers would have huge costs that (exempt) foodservice wouldn't. Restaurants would gain an edge, putting more price pressure on the eat-at- home beef-eating segment. Processed foods are exempt, so depending on the final processing definition, processors might be pushed further in the direction of pre-cooked and prepared beef to avoid mCOOL costs. That would additionally raise the average cost of retail beef, further eroding cost competitiveness with poultry in the case.

Ultimately, R-CALF and activists harnessing the power of the government to mandate huge costs on the beef industry would yield no benefits to consumers and force changes in eating patterns and fresh meat purchasing patterns for consumers. More plants could close and prices for fed and feeder cattle drop.

The end result: gifting the poultry industry a significant competitive advantage - paid for by the red meat industry.

Where does R-CALF get these ideas?

*Liberal Activist Groups like Carol Tucker Foreman's Consumer Federation of America, Ralph Nader's Public Citizen, Consumer's Union, Organization for Competitive Marketing, National Farmer's Union, Center for Rural Affairs and others

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Last Updated ( Monday, 16 July 2007 )
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