May 1, 2009


More gas for NAIS


Last week, USDA’s Animal Plant Health Inspection Service released a long-awaited cost benefit study to support the National Animal Identification System (NAIS). The report suggests that the animal agriculture industry, especially the beef indus- CROW try, could experience severe damage if an animal identification system is not adopted. The 400-page report was completed in mid-January and it’s sort of perplexing why they sat on it for three months, especially since NAIS is such a hot-button issue for cattle producers.

The report was produced by the ususal universities with a cast that most everyone in the cattle and beef industry is familiar with. The report was funded by USDA. The report suggests that if beef producers do not adopt a full traceability system with at least a 90 percent compliance rate, we could lose $13.2 billion in economic benefits from the export beef markets. A 90 percent compliance rate among beef producers would seem nearly impossible with a voluntary system. Only 35 percent of beef producers have registered their premises over four years.

They claim that a 23 percent increase in export demand would pay for a 70 percent adoption rate over a 10-year period and a 0.67 percent increase in domestic beef demand would do the same. The cattle industry would be responsible for 91 percent of the NAIS program cost and add somewhere between $3 and $5 a head in expenses for cow/calf producers. Costs would be much, much less for other segments of the beef industry. They estimate that USDA funding for an ID would cost just $175 million a year. The report claims that compliance with NAIS at the auction market level would cost each livestock market $8,000 for RFID readers and technology.

The packing industry would be subjected to $11,000 per plant. The report shows that a birth-to-termination ID system has become fairly common worldwide and at some point, will start to limit the export marketing opportunities for U.S. beef. However, it would be difficult to say that the Canadian ID system has enhanced beef sales for that country.

Nonetheless, the report makes many assumptions on economic outcomes, many related to the acceptance of NAIS by producers, at least as it pertains to animal health traceability. The first year that bovine spongiform encephalopathy affected the cattle market, the industry lost 80 percent of its export beef market. The authors take those assumptions and apply the same numbers to a potential outbreak of foot-and-mouth disease and claim that if only 30 percent of producers complied with NAIS, we could loose 80 percent of our export market the first year, 50 percent the second year, and experience a much slower recovery in subsequent years.

However, if 90 percent of producers complied, we would still loose 80 percent of the export market, but earn the market back much faster, losing only 10 percent the second year. They also claim that a full tracing system in the U.S. could increase export markets by 7.9 percent if only 30 percent of beef producers would comply with NAIS. If producers complied at a 90 percent rate, we could increase export markets by 34.1 percent. The report essentially says that a low compliance rate would produce fewer benefits than a high compliance rate and that the economic activity created through NAIS would be substantial to all aspects of the beef industry, from production to distribution.

It appears that this report would provide a reason for any congressman to vote for a mandatory NAIS, which we know is being discussed in the House Agriculture Committee. I don’t really know if USDA will be very eager to take on mandatory NAIS. It reminds me of a famous Joe Biden comment, “It’s your patriotic duty to pay more taxes.” This could be your patriotic duty, to conform to NAIS. It would also seem that anyone in the beef industry would be crazy not to want NAIS when you stand to lose $13 billion in market share because the industry didn’t make a $175 million investment. Currently, many producers are attempting to satisfy the source-verified markets for export trade, but the market certainly isn’t very large. If NAIS is about the market, I think voluntary is fine. If it’s about animal health, I think we’re looking at a mandatory system. — PETE CROW