U.S. U.S. Animal ID and Animal ID and Country of Origin LabelingCountry of Origin Labeling: :

What Are the Emerging Issues?What Are the Emerging Issues?

Wendy UmbergerAsst. Professor and Extension Agribusiness Economist

Department of Agricultural and Resource EconomicsColorado State University

APHIS VS Careers Program, Emerging Issues

Raleigh, NCMay 20, 2004

Presentation OverviewPresentation 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

Why Do We Need Animal ID?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

What are Traceability (TA) What are Traceability (TA) Systems?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.

Disease PreparednessDisease 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!!!

Examples of Disease Eradiation, Examples of Disease Eradiation, Control and Certification ProgramsControl and Certification Programs

Tuberculosis Brucellosis Scrapies Pseudorabies Johne’s Disease Exotic Newcastle Disease

Financial and Social Impacts?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

Health and Safety Traceback Health and Safety Traceback WithoutWithout National IdentificationNational Identification

All herds involved may be quarantined and tested

Packing Plant

Feedlot

Backgrounders, Auction Marts etc.

Herds of Origin

Health and Safety Traceback Health and Safety Traceback WithWith National National IdentificationIdentification

Less quarantining, testing and market disruption

- Packing Plant

- Feedlot

- Herd of Origin

BackgroundersAuction Marts etc.

Maintaining Market AccessMaintaining Market Access

In the U.S.

and Export

Markets

Countries with national ID– Europe, Australia, Canada, Japan

Countries implementing ID– Brazil, Argentina, Uruguay, Mexico

US Beef Export MarketUS Beef Export Market

About 10% of production Japan 32%

Mexico 26%S Korea 24%Canada 10%30 other 8%

High quality and high value beef Variety meats and hides (70% of tongues

are exported)

82%

Public vs. Private GoodsPublic 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 sectorSource: Bailey, D.

Domestic Market: Motives for Domestic Market: Motives for Establishing TraceabilityEstablishing 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

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

Coffee Attributes of Interest

Decaf Fair

Trade Fair

Wage Shade Grown

Non-GMO Safety

Processing

Sale from Producer to Wholesaler/Retailer

??????

Transportation Storage Harvest Cultivation St

ages

of P

rodu

ctio

n

Bean/seed Necessary Depth of Traceability

Possible Public GoodsPossible Public Goods

Animal disease control and eradication Bio-security issues

Is Traceability a Private Good?Is Traceability a Private Good?

Do U.S. Consumers Value Do U.S. Consumers Value Traceability???Traceability???

As Income Changes, Consumer As Income Changes, Consumer Preferences About Food ChangePreferences About Food Change

Tastes Good Variety

Nutritious, Safe, Affordable

Convenient

Promotes Health

Living Well

Status/Causes

Income

Source: Jean Kinsey. 2000. "The Changing Global Consumer". Presented at the 2000 IAMA World Food & Agribusiness Congress. Chicago, IL.

Dickinson and Bailey Held Experimental Dickinson and Bailey Held Experimental Food Auctions in the US, Canada, Japan, Food Auctions in the US, Canada, Japan, and the UK (2002):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):348-364.

Alternative SandwichesAlternative 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

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

05

101520253035404550

AnimalWelfare

Food Safety Traceability Combined

Attributes

Per

cent

Pre

miu

m to

Upg

rade

BeefHam

Private Goods – What Are Consumers Private Goods – What Are Consumers Willing to Pay for?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):348-364.

What is Mandatory COOL?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

The Controversy: The Controversy:

Labeling of Country-of-Origin?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.?

Mixed Origin and Blended Origin Mixed Origin and Blended Origin Meat LabelingMeat 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.;”

Umberger, Feuz, Calkins, & Sitz, “Country-of-Umberger, Feuz, Calkins, & Sitz, “Country-of-Origin Labeling of Beef Products: U.S. Consumers Origin Labeling of Beef Products: U.S. Consumers Preferences.”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”

Consumer Research on Beef: Consumer Research on Beef: Important Food CharacteristicsImportant 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 & SitzExtremely to Very Desirable1. Fresh2. Food Safety Inspection3. Color4. Price 5. LeannessVery to Somewhat Desirable

9. COOL

11. Source Assurance

13. Beef Raised in your region of the country

Consumers’ Rationale for Preferring COOLConsumers’ Rationale for Preferring COOL (75 % Preferred Labeled, 22% Indifferent)(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: http://www.farmfoundation.org/projects/documents/

Relative Value of Beef AttributesRelative Value of Beef Attributes(Loureiro and Umberger, 2003 U.S. Survey)(Loureiro and Umberger, 2003 U.S. Survey)

Attribute Mean Premium ($/lb of steak)

Percent Premium for Attribute

Country-of-origin labeling 0.562 8.3%

Traceability 1.031 15.3% Food Safety Certification 3.894 57.6%

Tenderness 1.138 16.9%

Source: Loureiro and Umberger. 2004. “Consumer Attitudes toward Country of Origin Labeling in the U.S.” Working Paper, Department of Agricultural and Resource Economics, Colorado State University.

Whom Do Consumers Trust to Whom Do Consumers Trust to Make Certification?Make Certification?

2 Studies conducted in the U. S. Bailey and Liddell, 2003 Loureiro and Umberger, 2003 (US)

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

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

W h o S h o u ld C e r t i f y C O O L ? W h o S h o u ld C e r t i f y C O O L ?

G o v e r n m e n t U S D A

I n s p e c t i o n S e r v i c e

6 3 %

T h i r d - P a r t y I n d e p e n d e n t

C e r t i fi e r s2 2 %

L o c a l P r o d u c e r s

1 3 %

O t h e r A g e n c i e s

2 %

S o u r c e : U m b e r g e r , W .J . a n d M .L . L o u r e i r o . “ C o n s u m e r R e s p o n s e to th e C o u n t r y - o f - O r i g in L a b e l in g P r o g r a m in th e C o n te x t o f H e te r o g e n e o u s P r e fe r e n c e s . ” S e le c te d P a p e r p r e s e n te d a t th e 2 0 0 3 A m e r ic a n A g r ic u l tu r a l E c o n o m ic s A s s o c ia t io n A n n u a l M e e t in g s . M o n t r e a l , Q u e b e c , C a n a d a . J u ly 2 7 , 2 0 0 3 . .

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

Possible Reasons for TA Systems Possible Reasons for TA Systems in U.S. Livestock Systemsin 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

National Animal ID MovementNational 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

National Animal ID MovementNational 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

September 29, 2003Developed by:

National Identification Development Team“A cooperative effort of industry and government”

Draft Document for2003 USAHA Presentation/Discussion

www.usaip.info

Who has been working on the USAIP?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

USAIP BackgroundUSAIP 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)

FoundationFoundation 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

National Premises ID SystemNational 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

What is a ‘Premises’?What is a ‘Premises’?

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

- (Section III.A.1, USAIP)- (Section III.A.1, USAIP)

Premises SystemPremises System

State Premises System

Premises Allocator

A23L449A23L449

National Premises

Repository

A23L449A23L449

Individual Animal Tracking Individual Animal Tracking Between PremisesBetween Premises

840 834502584384840 834502584384

A23L449A23L449

442DW31442DW31

Livestock Auction

SB3T552SB3T552

Proposed System for CattleProposed 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)

Implementation Stages: BeefImplementation Stages: Beef

Examples of EID TagsExamples of EID Tags

ConfidentialityConfidentiality

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.

Implementation in 3 PhasesImplementation in 3 Phases1. Implement National Premises allocator and

repository in 20042. 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

Implementation in 3 PhasesImplementation 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

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 PhasesImplementation in 3 Phases

• Management• Quality Assurance

Programs• Branded Products

Marketing Opportunities

Individual Animal Identification

Country of Origin

Labeling

Source Verification Process

Certification

Animal Health/DiseaseFood Safety

Marketing Opportunities

National Identification: An identification system that, through established standards and defined data elements, allows for the compatibility of systems while providing the efficient availability of agreed-to information across each segment of the industry

Individual Animal Identification

Questions To Be AnsweredQuestions 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?

What Data Should be Collected?What Data Should be Collected?APHIS’s Data Needs/WantsAPHIS’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

Third Party

Database

Potential Industry Use

Third Party

Database

Third Party

Database

Potential Industry Use1. Birth Records

2. Health Records

3. Genetic Information

4. Feedlot Performance and Carcass Data

USDA National Database

USDA Required

USDA National Database

USDA National Database

USDA Required

Feedlot Packer Auction Barn

Cow/Calf Producer

Feedlot Packer Auction Barn

Cow/Calf Producer

Feedlot Feedlot Packer Packer Auction BarnAuction Barn

Cow/Calf Producer Cow/Calf Producer

Numerous Traceback Systems Numerous Traceback Systems Available Available http://www.http://www.beefstockerusabeefstockerusa.org/.org/rfidrfid//

TotalPer

HeadUseful

Life Salvage

ValueAnnual

CostTotal

Per Head

Electronic tag --- $2.25 --- --- $585 $585 $2.34 Tags for cows (one-time purchase) --- $2.25 5 0 $141 $141 $0.56

Wand/stick reader $400 3 0 $155 $155 $0.62

Laptop computer $800 3 200 $249 $124 $0.50

Computer software $700 5 0 $175 $175 $0.70

Internet access $480 --- --- $499 $125 $0.50 Subscriptions/upgrade $250 --- --- $260 $260 $1.04 Labor $500 --- --- $520 $520 $2.08 Total annual cost for this example $2,086 $8.34

Software / web-based analysis and storage

Other

eID Transponder (tag)

Electronic reader

Data accumulator

Initial cost, RFID Cost

Estimated Costs for an RFID SystemExample is on 250 head at 8% interest

Kevin Dhuyvetter and Dale Blasi: Web-based spreadsheet to calculate RFID costs. www.beefstockerusa.org

Total Annual Cost of an RFID System

0

5

10

15

20

25

30

63 125 188 250 625 938 1250

Herd Size (Number of Head)

Cos

t/Hea

d ($

/hea

d)Costs Decline with Herd SizeCosts Decline with Herd Size

Kevin Dhuyvetter and Dale Blasi: Web-based spreadsheet to calculate RFID costs. www.beefstockerusa.org

Uncertainties Associated with Uncertainties Associated with Mandatory Animal IDMandatory 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?

SummarySummary 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

SummarySummary

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.