New trade rules increase accountability

Domestic population growth and demand are limited. Long-term expansion rests with marketing beef beyond North America.

The road to Japan for U.S. beef exports has been so long and chaotic many producers yawn at the latest news about if and when trade will resume. Besides the hurry-and-wait nature of the negotiations, apathy stems from the belief it will take years, if ever, for the U.S. to recapture its market share prior to Dec. 23, 2003.

Though that's likely true, foregoing Japanese trade and other export markets isn't an option. Domestic population growth and demand are limited. Long-term expansion rests with marketing beef beyond North America.

In the meantime, the industry continues to lose out on about $65/head of fed cattle. That's what the value of beef and beef variety meat exports to Japan have been worth historically. As supplies and cattle inventory increase, so will the value of normalized export trade.

Perhaps more significantly, the rules established to resume Japanese trade represent a watershed moment that ultimately will affect producers supplying cattle for export, or any other program requiring process verification.

Shape of things to come

“…In addition, it (the government of Japan) will review ranches/feedlots and feed mills to confirm such issues as production records transfer and feeding practices…”

That comes from a joint statement issued by the U.S. and Japan governments on “The Arrangement for Resumption of U.S. Beef Import Procedures.” At first blush, it outraged some producers concerned the statement meant Japanese officials could wander around “auditing” individual operations. According to Ed Loyd, USDA press secretary, that wasn't the intent, nor the reality. He says Japan fulfilled this demand by touring feedlots and feed mills, getting a better idea of how business occurs; kind of like a field day for the neighbors.

Even so, it underscores the notion that market doors will more frequently open and close based on specific processes and management, which are documented by more than a signature or a handshake. This reality reinforces the need for producers to make doubly sure they understand the increased responsibility and liability accompanying the potential opportunity for supplying cattle under the auspices of programs requiring records.

In the case of Japan, packers who want to export beef there must ensure the product comes from cattle 20 months of age or younger. To do so, they'll participate in a Beef Export Verification (BEV) program designed for that nation's demands; BEV requirements vary by country importing U.S. beef. In turn, Quality Systems Assurance (QSA) and Process Verification Programs (PVP) have blossomed as the way in which feedlots and producers supplying them verify cattle age via records.

More than signatures required

You can disagree with USDA allowing Japan or any other nation to inspect U.S. plants, and plenty of folks do. However, Loyd points out the U.S. routinely inspects operations in other countries to assure the safety of products imported to the U.S.

Similarly, you can squirm over the fact a BEV program for Japan is required to ensure beef going to Japan comes from cattle 20 months of age or younger, even though there's no scientific basis for that demand.

And you can logically rant about the contradiction of USDA refusing to allow companies to test for BSE on the grounds there's no scientific merit for it, then acquiescing to the above age restriction.

But you can't ignore the increased standard producers are being held to when they agree to provide cattle verified for age, source or any other process.

Moreover, given the large number of carcasses required to aggregate the pieces and parts for exports, which represent significantly less tonnage than what's actually exported, U.S. packers likely have a decision to make:

  • pay substantially more to get the cattle from producers willing to jump through the hoops of increased accountability,

  • simply make such compliance a new condition of trade, or

  • thumb their noses at Japanese trade altogether.

The net value of such trade makes the third option unlikely. As an example, according to a U.S. Meat Export Federation report in April, “The industry is losing $26/head without the ability to export liver, tongue, intestine and tripe to most countries.”

Simply expecting producers to provide added documentation is a fool's bargain for any packer accepting the risk of participating in programs like BEV without a robust pre-harvest records infrastructure. This isn't like a few years ago when packers demanded suppliers to sign affidavits they knowingly hadn't fed any mammalian protein to the cattle they were selling. What we're talking about now requires USDA certification, which requires participation in programs like BEV.

As for offering economic incentives, as always, the market will decide.

TAGS: Legislative