Animal ID: Opportunities for Value-Added
Marketing and Production Efficiencies
Prepared by:Kynda R. Curtis
Assistant Professor and State SpecialistDepartment of Resource Economics
University of Nevada RenoE-mail: [email protected]
Western Center for Risk Management Education
Western Extension Marketing Committee
Presentation Outline
• Overview
• Why might a national animal ID system be important?
• How might an animal ID system impact my bottom line?
• Case examples
• Summary
• Web resources
Overview• Animal traceability system motivation
– Minimize liability and bad publicity of food borne illness
– Traceability systems isolate source and scope of food safety
• Reduce recall costs
• Additional benefits to all members of food distribution system– Access to new markets– Price premiums– Production efficiencies
Why Might a National Animal ID System be Important?
• Traceability systems such as animal ID– Facilitate trace back during food-borne disease
outbreaks
– Minimize liability and potential bad publicity
• Governmental food safety standards in the U.S. reduce food safety hazards
• Increased food safety risks– Food imports (foods produced overseas)
– New food production technology• Biotechnology
Case Examples• StarLink
– Genetically modified corn product not approved for commercialization in U.S.
• Possible human allergen– Environmental activist group proved StarLink
introduced into human food supply– Resulted in costly recall program
• Mad Cow Disease (BSE): December 2003– Holstein cow in south-central Washington State– Resulted in two month investigation, 28 of 80
cohort cows traced back– Many overseas markets now closed to U.S. beef
• e.g. Japan and Korea
The National Animal Identification System (NAIS)
• Track animals from slaughter to herd or premise of origin
• Identification numbers for animal, herd of origin, and premise (ranch) of origin
• Record system of animal movement
• Assure consumers of U.S. beef safety levels
How Might an Animal ID System Impact My Bottom Line?
• Provide access to new markets– Overseas markets– Product quality attributes
• Provide access to price premiums– Value-added markets
• Aid in production efficiencies– Herd management– Improved profits
Consumers and the NAIS
• Food quality characteristics
are important to consumers– Rising consumer incomes in developed countries
– Studies show as income and education rises diet quality improves
– Consume more fruits, vegetables, chicken, etc.
• Consumers now spend more money on quality foods and food away from home
• Seek assurances from food industry regarding food safety and other quality attributes
Value-Added Markets
• Consumers willing to pay more for high-value products– Contain requested quality attributes
• Quality attributes/characteristics– Process oriented
• Growth enhancers, pesticides, feed, animal treatment….
– Content oriented• Fat content (lean), marbling, bacteria and/or
disease free
Credence Characteristics
• Many quality attributes are credence in nature
• Credence characteristics can NOT be discerned by physical inspection
• Consumer uncertainty regarding the existence of the attribute
• Seek quality assurances from industry and government agencies
Price Premiums
• Studies show consumers willing to pay premiums for:– Food safety – Specific nations/areas of origin– Natural/organic production – Humane animal treatment
• Traceability systems allow for process and content attribute verification
Case Examples of Companies Requiring Traceability
• McDonald’s, Jack in the Box, & Red Lobster– Purchase meat from processors which
ensure high food safety standards– Rewards include guaranteed sales
contracts and premium pricing
• Seek evidence of safety procedures through record-keeping– McDonald’s plan to have 10% of beef
purchases source traceable by end of 2004
Case Examples of Companies Using Traceability
• Maverick Ranch– Natural and organic products– 3rd party testing for antibiotics, growth
hormones, and pesticide residue– USDA certified “organic” label
• Coleman Natural Meets– Free range grazing, natural grass feed– No hormones or antibiotics– Humane animal treatment– USDA approved “natural beef” label
Case Examples of Companies Using Traceability
• Farmland Industries– Farmer-owned cooperative
– USDA “processed verified” logo
– Process verification system• Genetics
• Animal nutrition
• Animal health and welfare
• Safety measures
• Environmental protection
– 100% traceability of all products in program
Production Efficiencies
• Traceability systems enhance producer ability to:– Track animal performance from weaning to
slaughter– Identify most profitable genetics
• Herd management– Sell low performing cattle– Reproduce identified high performance
genetics
Example Case of Production Related Efficiencies
• Ranchers Renaissance– Cooperative of ranchers, stockers, feeders,
processors, and retailers
– Market Cattleman’s Collection, Harris Rancher, and Rancher’s Reserve brands
– Use electronic ID system since 1997• Efficient and economic way to collect data on each
animal and share with all partners
• Data includes animal source, process, and genetic verification
– Increased revenues by $2-$3 per hundred-weight on each calf
Summary
• Consumers seek high-quality foods• Uncertainty surrounding quality and safety
levels due to credence nature• Traceability systems may reduce consumer
uncertainty– Consumers willing to pay for greater traceability
• Access to new markets
• Increased pricing (premiums)
• Production efficiencies gained through increased information
Web Resources for Relevant Information
• Maverick Ranch– http://www.maverickranch.com
• Coleman Natural Meats– http://www.colemannatural.com
• High Plains Journal– http://www.hpj.com
• U.S. Animal Identification Plan– http://www.usaip.info
• Choices Magazine– http://www.choicesmagazine.org