Forget the insanity of a program that offers nothing to anyone, while increasing the cost of doing business. The most severe economic toll from the mandatory country of origin labeling (COOL) law being reviewed by the Obama administration could be the loss of trade with Mexico and Canada.
“Cattle-Fax estimates that, at the very least, it will cost cattle producers $50-$60/ head if we lose the NAFTA export markets,” says Erin Daley, U.S. Meat Export Federation (USMEF) economist. “In addition to the large volume of variety meats that we export to Mexico, rounds are a very popular item in that market. Rounds also make up a large portion of our exports to eastern Canada. It would be very hard to absorb these products into the domestic market.”
Daley was speaking as part of a COOL panel discussion in the Livestock Marketing Council at the recent National Cattlemen’s Beef Association annual meeting. She said Mexico and Canada combined to account for about $2 billion in U.S. beef export purchases last year – about 60% of the worldwide 2008 total. So any disruption in trade could have serious consequences for U.S. cattle producers.
Dan Halstrom, JBS senior vice president for international sales, says that $50-$60/head loss to cattle producers is low. “I think it would be quite a bit more than that because of all the end cuts and variety meats we would have to absorb into the domestic market.”
Plus, Daley points out the U.S. processing industry will have even more excess capacity if live cattle imports from Canada and Mexico continue to decline. This would drag down the industry’s level of efficiency, making it more difficult for U.S. beef to compete in global markets with exports from Australia and Brazil, for instance.
Losing the trade is more than possible. Various reports are that Mexican feeder cattle are being docked about $60/head at the border as buyers hedge their bets against subsequent discounts those cattle will receive from packers. Put that against a four-weight calf and you can’t blame Mexican cattlemen for filing a suit with the World Trade Organization over mandatory COOL.
Even so, some folks are pushing Obama to open the law back up to make it more restrictive than the final rule being reviewed.