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Will Mandatory COOL Hurt Ground Beef Sales?

Think of beef and most people bring to mind a juicy steak. But the beef industry's most valuable product is ground beef, sold as such, in patty form

Think of beef and most people bring to mind a juicy steak. But the beef industry's most valuable product is ground beef, sold as such, in patty form or in other ways. Estimates suggest these products represent about 42% of all the beef consumed in the U.S. each year. In terms of volume, the market is divided 50/50 between retail and foodservice.

Consumers purchase twice as much ground beef at retail as any other beef item. This makes implementation of mandatory country of origin labeling (MCOOL) all the more fascinating.

New labels, new headaches. From Sept. 30 on, consumers will see fresh ground-beef packages with a label that may read: “Product of the U.S., Australia, Canada, Chile, etc.” What consumers will make of this label is anyone's guess. But it's reasonable to suggest that such a label might confuse consumers and potentially result in unfounded food-safety concerns about the industry's most important product.

The ground-beef label is one of five that must be used on beef in grocery stores. The label will start with the words “Product of the U.S.” because the beef will have been processed here. Retailers must then list countries of origin in alphabetical order of what is contained in the product “or that may reasonably be contained therein.” One limitation is that a label can't include a country when raw material from a specific origin is not in a processor's (retailer, grinder or packer) inventory for more than 60 days.

As if that isn't complicated enough, USDA's interim final rule on MCOOL outlines the definition of ground beef slightly differently from other ground meats. Ground beef is defined as chopped beef with no added fat, no more than 30% fat and with no added water, phosphates or binders. The rule says ground beef includes hamburgers and beef patties, which observers say is confusing. This isn't consistent with the rule's definition of other ground meats. So the reference to hamburgers and patties should be removed from the final rule, they say.

MCOOL supporters declared they were pleased with USDA's rule when it appeared at the end of July. They might be less happy now to discover that MCOOL will apply to only 30% of all the beef consumed in the U.S. each year. That's even less than the 33% cited by USDA based on U.S. production.

The small percentage is because all foodservice sales are exempt and because of exemptions of numerous retail products. The rule and the MCOOL law exclude all covered commodities said to be a processed food item. So cooked, cured, smoked and restructured meats are exempt. So, too, are uncooked items such as corned beef and meatloaf.

Playing “catch-all.” MCOOL supporters will be even less thrilled to learn that retailers and packers plan to use the catch-all label that says “Product of the U.S., Country X, and/or (as applicable) Country Y” on as much beef as possible. This label will apply to beef from animals that might have been foreign-born but were part raised and then processed in the U.S.

But the label can also be used on beef from cattle exclusively born, raised and slaughtered in the U.S. In fact, the second-largest beef processor, Tyson Fresh Meats, has already told its customers it will adopt the catch-all label for all its beef. Widespread implementation of this option will minimize added costs for everyone, it says.

Conversely, any additional segregation of livestock and finished product will translate into higher wholesale prices and reduced product availability, Tyson warns.

Such a move is good news for some producers. Depending on guidance from packers, stocker operators and feedlots will not have to segregate Mexican-born from U.S.-born feeder cattle. This will help Southern Plains and Southwest feedlots in particular, as they handle the bulk of Mexican feeder-cattle imports.

The catch-all label will also apply to Canadian-born feeder cattle. Most feedlots and packers currently segregate them as part of the requirement for exporting beef to South Korea. But if Korea removes that requirement, feedlots and packers might stop segregating Canadian cattle, as well.

The bottom line is that use of the “Product of the U.S.” label will be much more limited than supporters had hoped. In fact, it's likely that this label will be found only on branded beef and specialty lines. The bulk of beef sold at retail will remain a commodity.
-- Steve Kay,