Feb 20, 2009

Out of control
Cattle futures took a beating the day after Secretary of Agriculture Tom Vilsack announced he was going to ask the packing industry to voluntarily tighten up the regulations on Country of Origin Labeling (COOL). The secretary’s announcement came two days before President Barack Obama was to visit with Canadian Prime Minister Steven Harper over trade issues. Needless to say, Obama will more than likely be confronted on his Ag secretary’s decision, especially after Canada toned down their talks about filing a complaint with the World Trade Organization (WTO).

The secretary made his announcement to several groups, which included Consumers Union, Consumer’s Federation, American Farm Bureau Federation, National Farmers Union, Food and Water Watch, and R-CALF, all very strong proponents of COOL. Ironically, no group representing the meat industry was in on the conference call, not the National Cattlemen’s Beef Association, National Pork Producers Council, or the American Meat Institute.

Vilsack then contacted the packing industry to outline his desired changes in COOL compliance, saying he would follow it up with a letter. Vilsack said if the packing industry didn’t make the changes on their own, they would reopen the rule-making process.

Meat packers have indicated little desire to conform to Vilsack’s request. The secretary was to have written packing companies a letter outlining his desired changes last Wednesday, but scheduling changes didn’t allow that letter to be dispatched. Several representatives from the packing industry have said that they didn’t think that there would be a letter and that Vilsack was premature in his efforts to change COOL rules. The packing industry intends to go forward with USDA’s current labeling scheme which will become law on March 16. It appears that Vilsack may be forced to initiate a new round of rule-making on COOL because packers won’t comply. Vilsack said he didn’t go directly to a new rule-making process because he didn’t want a vacuum that would be created by the process.

So it seems we have a bit of a poker game going on over COOL. Vilsack has essentially asked the packing industry to appease supporters of COOL even though USDA has written rules to govern the packing industry and has done it under the proper rule- making process. The process also took into account the requirements of Congress that the effort not be too intrusive to producers.

Unfortunately, this episode has more political tone to it than regulatory, which is all USDA can do. Perhaps Vilsack is having trouble going from a political world to a regulatory world. After his announcement last Tuesday, things have been quiet.

After the announcement last week, Canadians were eager to hear Obama’s thoughts on many trade issues, including COOL, and were concerned that he may reveal a desire to be more protectionist. Needless to say, the Canadian government and their meat industry groups were very upset about the plan to change COOL rules. The Canadians had threatened to file a complaint against the U.S. last December, but later tabled the complaint after the U.S. made some concessions in the final rule. In response, Canadian Agriculture Secretary Gerry Ritz said, “We put the WTO challenge on the table because the Americans had come through with what we are asking for. And should the Obama administration continue on with protectionism and COOL, we will then re-ignite our WTO challenge.”

COOL may be one of the most contentious issues concerning the beef industry and it’s still a shame it became law. It also was very difficult to write regulation for it because there were so many concerns about making it easy for everyone to comply. This is perhaps one of the most vetted laws ever dealt with by USDA. It’s only taken six years to get a regulation after the measure was passed into law. Vilsack certainly opened a can of worms and it looks as if the packers are going to call his bluff and force him to open up the rule-making process. In the meantime, we have both Canada and Mexico steamed about the issue, which has already had an impact on cattle prices.

The goal of the beef and cattle industries should be creating more demand for beef under the current economic circumstances, not attempting to make a bad law worse. We certainly don’t want to create any trade wars with our neighbors. Unfortunately, this is what happens when you make an industry issue a law; it takes on a life of its own, and then it’s out of your control. — PETE CROW