AFF Sentinel Vol.6#5

Vilsack Warns Obama May Give Bad News to Canada - Our #2 Beef Customer

To Turn mCOOL, Into COOL, COR & COS (Country of Origin, Country of Raising and Country of Slaughter)?

Saying the U.S. would not be a "good friend" if President Obama avoided giving bad news to Canadian officials Thursday and then imposed more restrictive meat labeling rules after he left town, U.S. Agriculture Secretary Tom Vilsack began warning packers Tuesday, according to CongressDaily.

But in a confusing setup, Vilsack said the final decision about "trade implications of the labeling program would be made by Obama himself," according to Jerry Hagstrom of CongressDaily. Then Vilsack turned right around and outlined steps he was already taking to change mCOOL regulations yet again, thrusting more changes and costs on a struggling meat industry.

In news perfectly designed to further anger America's #1 (Mexico) & #2 (Canada) beef customers and our #1 (Canada) & #3 (Mexico) oil supplying trading partners, Vilsack said he would require much stricter mCOOL provisions and get agreement from packers. If packers didn't agree, he threatened a new rulemaking process.

In a letter he said would go out to packers Wednesday, Vilsack was set to ask the meat industry to label each meat package with the country in which the animal was born, the country in which it was raised and the country in which it was slaughtered, CongressDaily said. He would also ask packers to cut the inventory window of sourcing countries for ground meat products from 60 days to just 10 days.

This is horrible news to a meat production chain already hammered by huge fuel and feed cost increases, the increases in costs already associated with mCOOL, mCOOL trade and animal supply disruptions and slackening world demand. The packers must wonder if the Obama administration wants to see them in straits like Detroit automakers. The livestock industry desperately needs export markets to reduce losses, not a trade war to cost producers money.

It appears that Secretary Vilsack is listening to activist ag and consumer groups who want more government interference in agriculture. He certainly can't be listening to consumers, whose buying behavior has definitively shifted to cope with reduced incomes and lost jobs. Retailers, packers and foodservice operators are reporting customers more often buying less expensive cuts and hamburger and less often selecting higher-priced "middle meats." Piling more segregation, tracking and labeling costs on packers will further threaten some plants' ability to stay open and further damage entire packing companies' bottom lines. Higher costs for retailers and upward pressure on prices further erode purchasing power for consumers already economizing to feed families.

Imposing stricter labeling - and thus segregation and tracking costs - on packers in the northern half of the U.S. who depend on both U.S. and Canadian livestock for volume to operate profitably threatens their viability, as well as the feedlots, auction markets and ranchers down the chain on both sides of the border. That could mean tougher times for cattlemen outside the High Plains who depend on smaller packers or large packers' smaller plants to make a market for the feedyards their calves end up in.

Mexican cattlemen are upset because they sell feeder cattle to U.S. feedyards who have sold them for years to U.S. packers. Much of the meat then goes back to Mexico, to U.S. retailers and foodservice or the retailers serving the American Hispanic population. But mCOOL costs have already significantly depressed prices for Mexican calves.

Because hogs thrive on corn rather than Canada's available small grains, Canadian farmers have raised millions of feeder pigs and sold them to hog finishing operations in the U.S., where corn was plentiful. Those finishers and the packing plants, all the way back to feeder pig operations on both sides of the border dependent on those packers, have been significantly impacted by mCOOL. Canadians are reluctant to talk about the fate of thousands of baby pigs with suddenly nowhere to go and the farmers who raised them.

Long term, mCOOL regulations interpreted in the strict and even overreaching vein the Obama administration is outlining, will further diminish a Canadian beef industry already struggling because of BSE issues plus all the factors American cattlemen are struggling with. A smaller Canadian beef industry would mean fewer slaughter cows that have helped satisfy American ground beef demand, which long ago outstripped domestic supplies. That means rather than getting ground beef from neighboring Canadian sources, more lean beef from Australia, New Zealand and South American countries will be needed, raising shipping costs and lead times.

President Obama backed off from a worldwide trade war recently when countries around the world protested the short-sighted "Buy American" provisions in early versions of the "Stimulus' bill. Hopefully, he won't want to start a North American trade war instead by hurting consumers in all three countries, businesses that trade goods and services across borders both north and south and give away more jobs in companies involved in the nearly trillion dollars of trade NAFTA has fostered.

Late Wednesday, the word was that Vilsack's letter would go out "soon" rather than Wednesday as originally planned. An explanatory news conference scheduled Wednesday morning was cancelled. USDA had spent many months working with all segments of the production chain plus activist groups carefully forging a workable balance between the law's requirements and unduly stifling commerce. This was not a last-minute rush job.

The sad part is the false premise the issue is based on: that mCOOL will somehow make food safer. It does not. Food inspection is what makes food safe. Origin is a virtually worthless piece of information costing hundreds of millions of dollars to livestock production chains and the consumer. We would hope the Obama administration will let the Final Rule as written take effect.

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