Paying for MCOOL

[Bull Burger]

Paying For COOL

By Clint Peck Senior Editor

May 1, 2003 12:00 PM


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With mandatory country-of-origin-labeling (COOL) legislation just around the corner, the entire beef industry is scrambling to see who's going to foot the bill for labeled beef. Until recently, there's been very little information on how deep consumers will dig to pay for the assurance of U.S.-origin beef.


Now a group of university economists led by Wendy Umberger of Colorado State University (CSU) has taken a stab at answering that question. She is an assistant professor in CSU's Department of Agricultural and Resource Economics.

Umberger says the research is the first attempt to quantify consumers' "willingness to pay" for U.S.-labeled beef. Previously, she says, studies seeking to determine consumer response to this type of "labeled" beef, were market-basket surveys and consumer attitude questionnaires.

"Or course, with those types of surveys you're going to get a high percentage of people saying 'yes' to something that feels good to them," she explains. "It's a completely different question though, to ask people if they're willing to pay more for a labeled product."

Her results came via surveys that directly address that willingness-to-pay question. The group also conducted experimental auctions in Chicago and Denver — another way to measure willingness to pay for labeled beef.

The data show the majority of consumers (73%) were willing to pay an 11% premium for labeled steak and a 24% premium for labeled hamburger. In the auction, consumers were willing to pay a 19% premium for steak labeled "Guaranteed USA: Born and Raised in the U.S."

The most common reasons consumers preferred labeled beef were:


food safety concerns;

a preference for labeling source and origin information;

a strong desire to support U.S. producers; and

beliefs that U.S. beef was of higher quality.


The auction part of Umberger's research was designed to be non-hypothetical with buyers selected to represent a cross-section of consumers using money to buy steaks and hamburger.

"This process was designed to take emotion out of the question about labeling and consumer buying decisions," she says.

She and her partners are following up this research with another survey of 5,000 households. This component will measure consumer willingness to pay for labeled beef, pork and poultry. It will also focus on other consumer preferences for beef.

The first survey indicates that consumers who were willing to pay the most for labeled meat believed the label signified increased food safety and quality. Therefore, Umberger says, retailers and processors labeling products with COOL may also want to consider labeling food safety and quality attributes.

"We'll be able to find out what attributes are most important to consumers," she adds. "These will be things like food safety, tenderness, traceability, etc."

The researchers especially want to know if consumers differentiate between source verification and country of origin in their purchasing habits.

Will COOL Pay?


No doubt about it, COOL will increase marketing costs in the beef industry, says Derrell Peel, Department of Agricultural Economics, Oklahoma State University. But the amount of additional cost is dependent on the decisions about implementation details yet to be decided.

"There's every indication that the costs will be significant," Peel explains. "As in any market situation, the general impact of increased marketing costs will be borne in part by consumers as higher retail prices and in part by producers as lower farm prices and/or increased production costs."

In the extremely complex beef industry, consisting of many different products and final markets, as well as a complicated set of production and marketing sectors, it's extremely difficult to say how these increased marketing costs will be distributed, he says.

"The costs will be shared, but probably not equally by all sectors of the industry," Peel adds.

COOL does not apply to food service establishments such as restaurants, hotels, convention centers, hospitals and nursing homes; or butcher shops and retailers with annual sales less than $230,000.

COOL will apply to fresh or frozen whole beef, lamb and pork muscle and ground meats — but not poultry. It won't apply to deli foods, canned or cooked products or fresh or frozen processed products. Seafood (wild and farm-raised fish and shell fish), perishable commodities (fresh/frozen fruits and vegetables) and peanuts will be covered by COOL.

"A large percent of consumers appear to be willing to pay premiums for COOL," Umberger concludes. "But, additional research is necessary to determine if the premiums are substantial enough to cover additional costs associated with certification and traceability programs necessary to validate the label."

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The costs will be shared, but probably not equally by all sectors of the industry

Of course not, if you are the middleman and you incur higher costs you either lower your input costs or raise the price of your finished product to compensate.

 

[Anonymous]

Bull Burger

PHONY SURVEYS- As you would know after looking at your "POLL"..... :lol:

Looking at your author makes me wonder- Is Clint a two timer-- I see he's listed on the R-CALF supporter list post... But I also see a couple of names of posters on here who have always been anti COOL and anti R-CALF....Makes you wonder if its bad info or slipping money under the covers...

 

[Bull Burger]

Bull Burger

PHONY SURVEYS- As you would know after looking at your "POLL"..... :lol:

I'm still laughing, Oldtimer. It just proves how surveys can be rigged with what you want people to say. I am proud that you voted: I'm not in favor (of MCOOL) even if those phony surveys say it'll work.


This is too fun.................you could slow that wind down, we don't need all that MT topsoil.

 

[Bull Burger]

Note date.

Montanans talk COOL
May 22, 2003

Attention steak-lovers: When you pick up that T-bone at the grocery store, do you know what country it came from? Chances are good that you don't, since retailers are not required to tell you.

But all that will change next fall when Country of Origin Labeling becomes mandatory for beef, lamb, pork, fish, perishable agricultural commodities and peanuts before they are sold through retail outlets.

The COOL concept is nothing new. Other products, like clothing, are clearly labeled "Made in the USA." Japan, most of Europe and other countries around the world label all food with its country of origin. And in the U.S., surveys have indicated that a majority of consumers say they'd like to know where their meats originated, with most willing to pay a premium for beef that comes from the United States.

But the plan is not so simple. Such labeling has an estimated cost from millions to billions of dollars by some estimates -- and it is still unknown who will bear the brunt of those costs. There is not consensus in the industry.

What is clear is that as of Oct. 1, 2004, retailers, such as grocery stores, can be fined if the meat they sell does not have clear Country of Original Labeling.

What is less clear is how the federal government will implement COOL. Over 150 Montanans involved in the beef industry got together in Bozeman recently to hear the facts and debates surrounding COOL.

As originally conceived, foreign meat would have to be labeled with its country of origin before it could enter the United States, attendees were told during a panel discussion at the Montana Livestock Forum and Nutrition Conference held April 29-30.

The new federal law, however, shifts the requirement to retailers. The retailer needs records from the packer, who needs records from the feedlot who needs records from the cow/calf producer.

The law applies only to retail meat, not to that prepared in restaurants, hospitals and other food service institutions, which make up 90 percent of meat imports, said John Paterson, an MSU Extension Service beef specialist and co-organizer of the meeting.

The program could benefit U.S. beef producers if they receive a premium (now that makes a lot of sense) because their product can be certified "Born, Raised and Processed in the United States."

However, Paterson said ranchers in border-states like Montana are concerned about the labeling of their calves. Some Montana calves are shipped to Canada for feeding and trucked back to the United States for processing. Under COOL, such animals could not be labeled as U.S. beef. Calves from cows that were inseminated with imported semen may also be excluded from the U.S. label, despite having been born in the United States.

Even murkier are guesses about how consumers will react to some labeling. For instance, hamburger may contain meat from half a dozen cattle that had each been raised in a different country.

"We're concerned that there might be a bit of a yuck factor there," said Bryan Dierlam of the National Cattlemen's Beef Association.

The NCBA initially sought regulations to label U.S. beef and was part of a task force assigned to facilitate implementation of COOL. However, the original recommendations changed so much that the NCBA withdrew its support for the revamped legislation, said Dierlam. Instead, he said, the cattlemen's group is concerned that COOL will put a "burden on people it shouldn't be put on."

The original intent of COOL was to help American producers, not burden them.

"You raise the best beef in the world under the best conditions," said Bill Bullard. Bullard is chief executive officer of R-CALF, a national non-profit cattle association with membership from cow/calf producers and independent stockers and feeders. "It's time you had the opportunity to capitalize on that," he added during the conference, which was sponsored by MSU Extension and the Montana Feed Association.

Nearly three-fourths of Americans say they would pay more for U.S. steaks. A Colorado State University survey indicated that 73 percent of American consumers said they would pay more for meat raised and finished in the United States. A similar study in North Carolina had more than 66 percent saying they would pay more for U.S. meat. In the Colorado survey, Americans said they would pay 11 percent more for U.S. steaks and 23 percent more for hamburger. However, country of origin was only one of many issues surveyed consumers thought were important. Consumers ranked freshness and food safety inspection far more important than COOL. The survey was done in June and July 2002, before the USDA issued its guidelines in October of that year. The authors of the study, led by Wendy J. Umberger of Colorado State University, cautioned that though consumers said they would pay more for meat "USA Guaranteed: Born and Raised in the United States of America," what they actually are willing to pay might be much lower.

"Consumers are saying, 'We want to know where our meat comes from, and we're willing to pay more for it,'" said Paterson. But ranchers, he said, want to know what records will be required to prove that their cattle are 100-percent U.S. beef, and what regulatory authority will verify those records. We won't know the answer to that until the final rules are printed later this summer.

Another unknown is how the costs of the labeling and regulation will be shared. Economists' estimates of the program's costs have varied widely. Projections range from $70 million to over $8 billion per year.

Gary Brester, an agricultural economist at MSU-Bozeman, said that nobody is able to predict what may happen when COOL takes effect. While COOL might reward producers of higher-quality products and increase the demand for beef overall, it could also be a boon to the poultry industry (which, with virtually no imported meat, is for practical purposes exempt from COOL), increase packer concentration and drive some ranchers out of business if profit margins are not favorable.

"The debate on COOL is not whether or not we should have it or not--we've got it," said Paterson. "We want answers to determine how the law will be implemented, what it will require, what the rules and regulations are, and whether we are in compliance with the records we already collect."

Traditionally, the annual Montana Livestock Forum and Nutrition Conference offers nuts-and-bolts ranching strategies. But this year, Paterson said, examining various perspectives on COOL was the most important issue that could be tackled. The conference line-up included cattle association representatives, a packer and the executive secretary of Alberta Cattle Feeders Association. The Canadian argued that the American beef industry's real enemy is chicken, not our "neighbors to the north."

"The conference was designed to get people together to express their differing opinions," said Paterson. "If people came away from the conference learning more about this contentious issue, then I've accomplished my Extension job."