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Articles from 2004 In December


Beef Checkoff Case Now Before The Supreme Court

The entire industry listened intently to the oral arguments presented to the U.S. Supreme Court on Wednesday. Now, it must wait, perhaps until Spring, for a final ruling that's will determine once and for all the fate of the beef checkoff.

It's impossible to miss the irony imbedded in this case. The opponents of the checkoff, who never argued that they disagreed with the message of promoting beef, found themselves after the mushroom case making the argument that as cattlemen they were being forced to support a message with which they didn't agree.

Meanwhile, checkoff proponents, who had always heralded the fact that the program was producer directed and funded, now find themselves arguing that the promotion efforts are government speech.

Most court observers believe the final decision will carry even more nuance than that. In 1997, the court upheld a generic marketing program related to California peaches, nectarines and plums, ruling the objections by some farmers to the ads weren't enough to outweigh the majority of producers and lawmakers who deemed the ads to be beneficial (by a vote of 5-4). Yet in a 6-3 vote in 2001, the Court ruled against the mushroom checkoff, saying the mushroom program was primarily about commercial speech while the California program involved a more extensive regulatory process.

While the Beef Promotion and Research Act plays a major role in supporting nutrition and food safety research, certainly a large portion of its budget goes to promoting beef. Passed in 1988 by a 79% majority, the checkoff has become the industry's major means of conducting research and marketing its product. Unquestionably, all the academic studies have validated that the beef checkoff has worked, returning to producers $6 for every $1 invested. Since 1998, beef demand has grown by 16%, reversing 25 years of plummeting beef demand.

The Livestock Marketing Association (LMA) and the Western Organization of Resource Councils have led the checkoff challenge, while a producer organization -- the Nebraska Cattlemen -- elected to take the lead in acting on behalf of the checkoff.

You have to give LMA credit for holding to their convictions in actively defying the vast majority of its customers (both buyers and sellers) who favor the continuation of the checkoff. After all, opinion polls continue to show producer support for the checkoff to be around 70%, with larger producers far more likely to support the program than smaller producers.

In addition, a total of 113 state and national beef and ag organizations, 35 attorneys-general from nearly every major beef producing state, and the chairmen of both the U.S. House and Senate Ag Committees have filed friend-of-the-court briefs in support of the checkoff. It's hard to fathom any other business organization that would so actively pursue a legal remedy contrary to the wishes of its customers.

LMA spokespeople admit the checkoff has benefited the industry, but the organization hasn't wavered in its commitment to the case. In fact, LMA has openly implied to the 28 states that have enacted legislation allowing a state-level checkoff program to continue if the national program is struck down, that those programs would likely face legal challenges.

Adding another twist to the court case is the fact that Supreme Court Justice William Renquist is battling cancer, and speculation abounds that he's likely to step down before the checkoff case is decided. If this were to happen, the remaining eight justices could potentially deadlock at 4-4. Such a result would validate the lower court's ruling on the checkoff that the program is unconstitutional.

What Is A Beef Cow Worth?

what is a beef cow worth

Last month, I suggested that a fall 2004 preg-checked bred heifer that will produce seven consecutive calves has a calculated economic value of $1,560. A rancher paying $1,560 for that bred heifer this fall should expect to earn a 6% return on his investment.

The same economic analysis can be applied to bred cows of all ages. For example, a fall 2004 bred cow that produces six consecutive calves has an economic value of $1,489. Her economic value with five consecutive calves is $1,398; four consecutive calves it is $1,290; three consecutive calves is $1,159; and two consecutive calves is $1,049. Each economic value is calculated utilizing each female's lifetime annual net income values plus her cull cow income discounted back to today's dollars.

So what's a bred female worth today? I distinguish between the sale barn value of bred female and the economic value of a bred female in a rancher's herd.

The sale barn value is what a bred female would bring at the local sale barn where the driving factor is the gross value of today's feeder calves. As gross value goes up, the sale barn value of a bred female goes up. Now that feeder calf prices are quite high, the sale barn price of bred females is rising.

The economic value of a bred female, meanwhile, is the sum of future annual net incomes generated by all the calves she produces, plus her salvage value as a cull cow. These future incomes must be discounted back to today's dollars. Note this is net income, not gross income as I frequently hear ranchers use.

I suggest ranchers bring females into their herds when the economic value exceeds the sale barn price. The higher the economic value relative to the sale barn price, the more profit potential.

The beef cattle cycle, its resulting beef price cycle, and ranch resource costs are three key factors affecting the economic value of a bred female — regardless of her age. Finally, the economic value of bred females is ranch specific.

what is a beef cow worth?

The cycle's "owning" phase

As is typical during the turn-around phase of the cattle cycle, I am currently receiving a lot of calls from folks who want to buy beef cows. Increasingly, more of these calls are from potential first-time cow owners. It seems everyone wants to own beef cows when calf prices get high in the cattle cycle.

I believe the last two years of high calf prices have now triggered the current cattle cycle's “everyone wants to own beef cows” phase. By 2005, that phase will change to “I have got to own some of these profitable beef cows!” Generally, this phase abruptly ends when calf prices break downward.

I project calf prices will stay strong for the next two, and perhaps three, calf crops. Calf prices will go south toward the end of the decade. Purchased females need to be paid for before calf prices turn south.

Now that calf prices have increased is not the best time in the cycle to buy beef cows. The best time to buy cows is when no one wants them — like a couple of years ago.

Anyone intending to buy cows over the next two years should buy them now, and the sooner, the better. Buy them now so newly purchased cows have more high-priced calf years to pay for themselves. I fully expect bred cow prices to get stronger until current calf prices turn sharply downward — like calf prices did in 1994. Bred cow prices peaked in the last cattle cycle in 1993.

Five calculation steps

Here are my five steps for calculating the economic value of bred females:

  1. Prepare a set of long-run planning prices. Beef cow producers find the development of a set of long-run planning prices one of the most difficult and complex tasks of the planning process. Start with planning prices and modify them to fit your economic projections.
  2. Prepare an economic budget for your herd. I used the five-year (1999-2003) average enterprise accounts for 769 Northern Plains beef cow herds as my base year. These enterprise accounts are posted by the University Of Minnesota.
  3. Utilizing your long-run planning prices, annual enterprise budget projections must be prepared for each of the 7-9 years a heifer might be in your cow herd. I utilized each year's long-run planning price and constant five-year average production costs for my projections.
  4. Project the salvage value of cull cows. Use the University of Missouri's FAPRI Baseline Briefing Book as your source of long-run cull cow planning prices.
  5. Determine the appropriate discount rate. This should be your after-tax interest rate for borrowed money. I use a 6% discount rate.
  6. Calculate the net present value (NPV) of a bred heifer. The bottom line presents the calculated NPV of bred females under different numbers of lifetime calves produced.

Harlan Hughes is a North Dakota State University professor emeritus. He lives in Laramie, WY. Reach him at 701/238-9607 or [email protected].

 

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Chokepoint Or Checkpoint?

While hogs and poultry generally travel their entire life paths in a common group, beef animals often change hands multiple times. Often, those changes of ownership come via auction markets where thousands of animals from many different locations are congregated, sorted, sold, regrouped, put on trucks and shipped out again — all at a fairly lively speed of commerce.

Some 35-40 million cattle and calves trade through U.S. livestock markets annually. Government and industry are in the process of developing and implementing a national livestock ID and traceback program, and that means America's auction markets will be a critical control point in that tracking effort.

“Collection points like sale barns have the greatest need for tracking animals because that's where they are potentially commingled. Auction markets are the pinch points where animals are brought together, sorted around and then sent in all different directions,” says Dale Blasi. He's a Kansas State University Extension beef specialist and a leader in beef cattle electronic identification (EID).

So, how do auction businesses that churn tens of thousands, perhaps hundreds of thousands, of cattle each year through each of their facilities accurately and cost-effectively track all that individual animal movement, without slowing down the speed of commerce?

That's what the Joplin Regional Stockyards (JRS) in Carthage, MO, set out to learn June 24 when the family-owned firm offered 6,000 preconditioned calves in a special Value-Added Calf (VAC) sale. The difference between this and the other VAC sales JRS has conducted regularly since 1997 was that these calves were source-verified, and each was outfitted with both a radio-frequency ID (RFID) ear tag and a visual tag as backup.

During the process from unloading at JRS to load-out after sale, the calves were moved in single-file chutes past electronic reader panels at three locations — as they exited vehicles at arrival, as they exited the sale ring, and as they entered vehicles at load-out. As the calves passed by each reader, a beep sounded to signal that the information transmitted from each RFID tag had been received.

A learning process

“I thought the sale went really well,” says Jackie Moore, who along with Steve Owens is a JRS co-owner of this family business.

Owens adds: “We wanted to implement and test-run an animal ID system to learn more about how to make it work for our customers and for our operation.”

Since that initial sale, JRS has conducted others in October and November. Three more VAC source-verified sales are set for December, with the largest selling 10,000 head, scheduled for Dec. 2. Another three VAC sales are planned for January, all in the neighborhood of 7,000 to 10,000 head each. Over a 12-month period that will end next spring, Owens estimates JRS will market about 150,000 head of source-verified, RFID-fitted cattle.

“We learn a little more from each sale,” Owens says, “and this is still very much a learning process for us. As a result, we don't have any overall recommendations to make just yet.”

But one thing that is certain, says Owens, who serves as vice-chair of the National Cattlemen's Association (NCBA) Livestock Marketing Council, the demand for source-verified cattle is sure to grow. He believes it's a certainty, even if there were no push underway for a national system of individual animal ID and traceback.

“Niche markets will require it,” Owens says. “And, when source verification becomes mandatory, there won't be any premiums. Therefore, we feel it's best to participate early and figure out for ourselves and our customers how it will be done.”

That demand has been borne out in the JPS source-verified sales held thus far. Owens says sellers in the special June sale realized premiums of $5-$8/cwt. over the prices brought by commodity feeder calves sold earlier that week. In the October EID sale, premiums were $4-$7 over the commodity calf sale JRS conducted earlier that week.

“That's a total of anywhere from $25-$40/head for a protocol that included certain health and management practices and source verification,” Owens says.

A longer marketing process

Mark Harmon, in charge of marketing and public relations for JRS, says the use of EID in their June and October sales added about 1½ hours to the day's selling process.

“The speed will improve in future EID sales,” Harmon says, “but it does slow the sale down.”

Regarding the accuracy of the electronic readers in collecting data from the RFID tags worn by calves, Harmon says that, of the first 700 head sold the morning of June 24, the readers missed only six or seven tags.

“And those misses could have been due to bunching by the cattle, or it might have been due to missing tags. EID can be difficult at times because you can't always control what some animals will do. But, because each calf in the sale also had a visual tag, we were able to match them up to the spreadsheet anyway,” he says.

Harmon says his past year has been largely consumed by the EID source-verified concept. The effort began last March with testing at JRS of different reader and tag components.

“Then, we put together a pilot group of people, consisting of representatives from ear tag suppliers, pharmaceutical companies, feed companies and data management folks,” Harmon says.

Working off what they learned, JRS made some modifications to the existing operation in order to facilitate smoother cattle flow and EID equipment. In addition, the auction's computer system was redone and the business's software customized to streamline handling of all the extra information.

Rethink and tweak

Following each source-verified sale, Harmon says JRS has studied the experience then made modifications to streamline the next sale.

Harmon says the impetus for JRS's EID trailblazing effort is simply customer service.

“We try to be progressive, but if a practice doesn't make our customers money, then there's no sense in doing it,” Harmon says. “We're seeing some great competition for these calves, and we'll continue to source-verify cattle as long as it puts money in our producers' pockets.”

Harmon believes JRS's foray into EID will prove helpful to other auction businesses down the road.

“Over time, we hope we can work out a lot of the bugs and make it easier and more economical for smaller yards that join this effort later,” he says. “We're learning more every time, but it's still too early to make recommendations.”

Owens hopes the mandatory aspect of such a traceback program is at least 3-5 years off.

“All the members of NCBA's Livestock Marketing Council realize an animal ID and traceback system is needed and that it's coming,” Owens says. “But, most would agree that we're not prepared to have any kind of mandatory system in the next year. We really need another three to five years to figure this out.”

KSU's Blasi agrees. “A lot of market facilities in the U.S. are old. Attempting to read the animal at some of the critical points needed to maintain inventory information with EID will require some cutting-torch and welding work in order to retrofit a low-frequency ID system to accommodate the speed of commerce,” Blasi says.

Anxious auctions

As is every segment to some extent, Blasi feels the auction segment is particularly anxious about the ramifications of a national ID system, including concerns of added costs and potential loss of business.

“If you're a sale barn selling only 500-1,000 head/week, a big concern would be just the cost of installing equipment,” Blasi says. “When it can cost several thousand dollars for a stationary electronic reader, how do you recoup that cost? And, if they pass it on to their customers, will there be a backlash?”

In fact, in January comments regarding the U.S. Animal Identification Plan, the Livestock Marketing Association's Billy Perrin said the cost of refitting the markets to accommodate the movement of animals through the market and past the readers will likely be much greater than the cost of the readers themselves.

“Also, we anticipate that the cost of setting up and maintaining the computer infrastructure and hiring technical staff to run and maintain these systems in the markets will be equally enormous,” Perrin added.

Blasi says larger sale barn firms, those perhaps marketing 5,000-6,000 head each week, worry that sellers with larger drafts of cattle might go direct to the buyer to bypass the potential for added stress and shrink on cattle. But, having said that, Blasi says all one has to do is look at JRS to see an entirely different perspective.

“Jackie Moore and Steve Owens are going at that change loaded for bear because they see the opportunities there. They aren't afraid of change,” Blasi says. “To survive, sale barns need to spread their wings and take their services to their customers.

“There will be an incredible need for educational programs with the national ID traceback program,” Blasi says. “There's an awful lot of rumor that circulates out in the country and there will be a high demand for education.”

He says firms could offer EID tagging services to their customers, help them obtain their premises ID, assist them in recordkeeping or take the lead in scheduling the marketing of their livestock.

“If you're a progressive auction market, EID won't be a problem,” Harmon says.

You can learn more about JRS at www.joplinstockyards.com/.

Pick A Number

Few would suggest it's easy tracking an unidentified animal from the packinghouse door back to the ranch of origin. But no one seems to know precisely how difficult it is, either.

We queried several industry players — those whom you'd figure would know — but they either demurred or admitted there's no way to know how many cattle today can be traced back for the purposes of animal health or commerce.

From the standpoint of the Animal and Plant Health Inspection Services, Amy Spillman, USDA public affairs, explains that all adult cattle are supposed to have official USDA back-tags at slaughter. These tags identify the most recent pre-harvest location of cattle. But, she adds, fewer than 25% of these back-tagged animals going through federally inspected harvest facilities have brucellosis vaccination ear tags that would allow quick trace-back to the ranch of origin. Spillman estimates about half of all dairy cattle are currently identified through the Dairy Herd Improvement Association.

USDA can track unidentified cattle, it just can't track them all. And, often, they can't do it within 48 hours as the National Animal Identification System (NAIS) proposes.

As an example, a couple of years back, out of all the carcasses USDA was tracing back due to residue concerns, the agency traced back all but 16%. Often, that entailed trouncing through lots of receipts and checking accounts in order to do so.

Finding 84% is either mighty good or the equivalent of Russian roulette. Either way, it's not USDA's fault; it's the ID system they've been dealt.

According to the last beef report by the National Animal Health Monitoring Service in 1997, 48.1% of all beef cow operations were estimated to use some form of individual ID on calves. Another 53.2% were using individual ID on cows. Keep in mind that's operations. The percentage of calves and cows identified individually by some means was estimated at 64.7% and 69.8%, respectively.

One could assume the majority of the 2.4 million head marketed through programs listed in the latest BEEF Alliance Yellow Pages (August 2004 issue) would be more traceable. Certainly, within some of the programs, cattle are traceable from the box back to the ranch of origin. Even if you figure all listed were that traceable, though, that's only about 10% of that year's fed cattle harvest. And, really, it's the cows entering the marketplace that have the greatest opportunity to harbor long-incubating disease such as BSE or Johne's.

So, there are facts here and there, but most of the estimating is just that. Hopefully, NAIS will change that.

Taking Shape

The pace is still slower than some would like, and the road toward a fully realized National Animal Identification System (NAIS) is strewn with question marks. But, producers can now register their premises in a number of states, and soon will be able to tag individual animals to comply with the program.

In fact, Neil Hammerschmidt, NAIS coordinator, says, “We've made tremendous progress with the foundation of the system.”

Specifically, Hammerschmidt is referring to the Standardized Premises Registration System adopted by USDA in August that is part of the framework for NAIS implementation. So far, he says 15 states are up and running with the system, with another 17 in various stages of becoming operational with it. He adds, three tribes and 11 other states have requested use of one of the nine other premises registration systems currently being reviewed by USDA.

So, 43 states are either registering premises for NAIS or preparing to do so.

By way of review, premises registration — allocating a unique ID number to each unique location where livestock reside — is the first step in implementing NAIS.

For the purposes of NAIS, a premises is defined as any geographically unique location associated with animal agriculture that would allow for the commingling or movement of animals or poultry involved in commerce. So, farms, ranches, livestock exhibitions, sale barns and feedyards are all example premises. It will be left to states and their producers to cut frog's hair over what they define as premises within those terms.

When fully implemented, NAIS is supposed to enable state and federal animal health officials to track any head of livestock discovered to have a foreign animal disease (FAD), or what are termed “diseases of domestic concern,” back to all previous premises (locations) of residence within 48 hours. Thus, premises registration, with unique NAIS premises ID numbers issued by state animal health departments, will ultimately allow tracking and matching individual animals to specific locations.

“Producers need to be figuring out their premises registration and getting them registered,” says Gary Wilson, an Ohio producer, co-chair of the NAIS Cattle Working Group and a member of the NAIS subcommittee to the Secretary of Agriculture's Advisory Committee on Foreign Animal Disease and Poultry Disease.

In the case of producers with multiple operations, Wilson says that means first deciding whether to request a single premises ID number that encompasses all operations, or requesting premises ID numbers for each distinctly separate operation.

For example, your operation includes two distinctly different and geographically separate enterprises — a cow-calf herd and a stocker operation — that you register as a single premises. If an animal with a FAD were traced back to the stocker enterprise, chances are state animal officials would have no choice but quarantine both the cow herd and the stocker operation.

On the other hand, if each one had a separate premises ID (both operations being distinctly different with no cattle commingled between the two), presumably officials might be able to quarantine only the stocker operation, leaving the cow-calf business open for commerce.

To see if your state is registering premises or when it will be, contact your state veterinarian's office. As well, by Dec. 1, USDA plans to have a new NAIS Web site operational (www.usda.gov/nais), which will include state contact information.

Let the tagging begin

With the premises registration system coming on line, Hammerschmidt explains USDA issued an interim rule on Nov. 8 that enables cattle producers to begin tagging individual animals in compliance with NAIS requirements. These requirements will be fully explained in the Uniform Methods and Rules (UMR) — expected to be released by early 2005. UMRs provide program standards for federal, state and industry participants as animal health programs are implemented. The NAIS UMR will be based on the results of various federal, state and industry collaborative efforts from the past few years.

The interim rule sets the standards for official NAIS animal identification numbers (AIN) — 15 digit numbers, with the first three being the country code (840 for the U.S.). AIN distributors should be able to start obtaining AINs from USDA by mid 2005. Operations using these numbers should also obtain a premises registration number. When AIN numbers are available they will only be issued to operations that have registered their premises. In the meantime, the rule allows producers who are already using tags with certain versions of the Animal Numbering System — specifically those that begin with USA or with a manufacturer code issued by the International Committee on Animal Recording — to do so, as they are being grandfathered into NAIS.

For perspective, producers ready to begin NAIS — and those already tagging cattle as a course of business but wanting to ensure their tags will comply with NAIS — had become increasingly frustrated that USDA couldn't tell them which tags they could use or when official tags will be available.

In that same vein, cattle producers have been wondering how the NAIS Cattle Working Group, which has specified that radio-frequency ID (RFID) technology be used for cattle in the NAIS program, would resolve that recommended requirement with USDA's stance that NAIS be technologically neutral.

“The opinion of the Cattle Working Group is that RFID is the technology that works best for our industry and that only one technology should be used in our industry,” Wilson says. “We don't believe the concept of technological neutrality has any application at the producer level.”

As for USDA, Hammerschmidt explains, “We're not recommending the use of multiple technologies, but rather leaving it to the industries to decide. Every beef or dairy animal must have a tamper-evident (single use) tag with an official AIN. Whether that tag happens to have an electronic chip in it, or if the AIN is associated with a retinal image, that decision will be driven by the industry.”

According to Wilson, the RFID recommendation will be made by the Cattle Working Group committee for consideration and inclusion in USDA's UMR draft.

NAIS in the real world

Besides ongoing questions about cost and who will ultimately foot the NAIS bill, Wilson says the most contentious issue to be resolved concerns the database or databases that will house required NAIS information collected from producers. This information will include premises ID number, animal AIN and animal movement information, but no production data. Just who will control this information?

“We feel it's essential for USDA to have the responsibility for a centralized database,” Hammerschmidt says.

He explains USDA needs unencumbered access to the data necessary for 48-hour traceback. He points out a centralized database of this sort can also be integrated with other disease monitoring databases at the federal level, such as those for the emergency response system and the national animal health monitoring laboratory. Such integration, he says, would also mean that all producers, sale barns and packers would only have one database to which to report animal movements.

“Even the private data companies recognize that state veterinarians need a central point to go for retrieving information for tracking,” Wilson says. “And, sale barn managers aren't going to know what animal's information is maintained by which private data company, so they need a central point for depositing animal movement information from all of the livestock moving through their facilities.”

Still, some in the industry favor the private approach.

Apparently, part of this has to do with confusion over what USDA intends a centralized database to be and ongoing squeamishness about USDA housing any producer information for fears that it might be accessed for non-NAIS reasons via the Freedom of Information Act (FOIA).

Speaking to the confusion, Hammerschmidt explains the only data USDA wants to maintain in a central repository is what is necessary for them to initiate immediate traceback. This information is premises number, AIN, date and event code (indicating such things as animal movement or tag retirement).

So, rather than USDA seeking to pull necessary data from individual databases in each state, Hammerschmidt says each state will use a data collection system provided by USDA, or a compliant one chosen by the state, then will forward the four essential NAIS data elements to USDA.

As for the worries of information confidentiality, USDA has already forwarded a draft bill to the House Agriculture Committee which amends the Animal Health Protection Act by adding a new section that protects from disclosure certain information contained in the NAIS database. It also specifically precludes state and local authorities from releasing USDA's NAIS information under their respective laws. Whether the bill finds a sponsor and then ultimate Congressional approval is anybody's guess.

Moreover, even with such a law, some worry that information could remain FOIA accessable at the state level if states don't have laws protecting it. According to Hammerschmidt, some states are currently reviewing the need for such legislation, just as some states have already passed laws requiring all livestock premises be registered.

Hammerschmidt also points out a centralized database only receiving the minimal required data from states means that states must maintain additional animal information such as age, sex and breed that will allow for the next steps in traceback. States might build upon the system USDA will make available, craft their own individually or as part of regional alliances, or they might contract private data management companies to provide these services.

Potentially, some of the cooperative agreements USDA funded last summer may help demonstrate the merits of one database design compared to another. At least one of the projects will compare the efficiency of a centralized database to a decentralized one.

All told, USDA awarded $11.6 million for cooperative agreements to 29 states and tribes last August. In October, the agency awarded another $1.5 million to the 13 states that had unsuccessfully requested funding earlier. In addition to funding existing and new field trials demonstrating the effectiveness of different technologies and systems for use in NAIS, the money will support premises registration.

Of course, being awarded money and receiving it are two different things. Through October, some of the recipient states had yet to receive the awarded dollars. Hammerschmidt says the time lag has to do with official processes and the fact most of the recipients were requested to make revisions to their original applications. He expected dollars to begin changing hands in November.

Wilson also speaks for many others when he says, “I really don't care what database system is decided on as long as it's accurate, secure and easy to use.”

Next steps coming soon

The database discussion may seem like mundane minutiae to those not intimately involved in the process. But, it's central to USDA and the livestock industries being able to move forward with the UMR mentioned earlier, which will provide producers more detailed NAIS standards and requirements.

So far, those who have studied the USAIP that preceded NAIS should not be disappointed.

“The work done through the national animal ID group at the National Institute of Animal Agriculture, then through the National Animal ID Team (which developed USAIP), all of the basic standards are being carried through quite well into the NAIS program,” says Scott Stuart, a committee-mate of Wilson's.

“Look for individual animal ID and animal movement reporting systems to come online next year and in 2006,” Wilson says. “Our (NAIS) plan is to be able to evaluate the system in 2007 and identify the level of participation in it. This will continue to operate as a voluntary system at the federal level at least through 2007.”

Presumably, at that point, if participation is too low — the definition of which is everything but objective — all bets are off on the mandatory nature of the program.

A series of NAIS fact sheets, produced by the Western Extension Marketing Committee, the Livestock Marketing Information Center and the Western Center for Risk Management Education, are available online at: http://ag.arizona.edu/arec/wemc/wemc.html.

Do Hot Irons Have A Role?

Hot iron brands have been used to identify animal ownership since before the days of the Egyptian pharaohs. And, they've been a mainstay of traditional ranching, backed up by state law, throughout the West. So, it's hard to imagine that high-tech animal ID will replace the branding scene on American cattle ranches anytime soon.

Chugwater, WY, rancher Phil Ellis says it straight out when addressing the role brand laws will play in the current animal ID debate.

“We're not opposed to identifying cattle,” explains the Wyoming Stock Growers' Association (WSGA) president. “We've used the brand system in our state for more than 130 years. At this point, we do not endorse a mandatory ID system beyond our brand laws and regulations.”

Most U.S. states have brand registries, and branding remains mandatory for virtually all cattle entering commerce in 14 states. New Mexico's law is the most specific — the law says anyone owning livestock “shall have and adopt a brand for them.” Like most other Western states, New Mexico requires the brand be applied to cattle with a hot iron.

Changes in the wind

Recognizing that changes in the old decrees ruling cattle ID are in the wind, WSGA's leadership was instructed by members to appoint a working group to provide input on proposed state and federal ID programs.

“We're very concerned that an ID program needs to be private, respecting the cattle owners' private property rights and the liability issues that could result,” Ellis says. “It needs to be practical, both at the ranch and in the marketing chains.”

Wyoming's brand system has delivered on this pledge — but is it enough to move forward?

WSGA executive director Jim Magagna says assuming the goal of a national ID system is 48-hour animal traceback, a brand program probably won't work alone. He says brands will likely function as a link between animal ownership, premises registration and a national traceback system.

“Like any other ID system, brands have limitations. One problem is duplicate brands within a state and between states,” Magagna says. “But, we're going to make every effort to make sure our brand system is incorporated into Wyoming's ID program — whatever that might be in the end. We won't forgo our brand system.”

North Dakota's Wade Mosher agrees existing state brand inspection should be recognized and networked into other ID programs where possible. Mosher is executive vice president of the North Dakota Stockmen's Association, which oversees the state's brand inspection system.

He says that with some modifications (see sidebar on page 40), his state's brand inspection system can provide 48-hour traceback capability — a process that can be accomplished for the cost of inspection — 75¢/head.

“A lot of people don't realize that when we conduct a brand inspection the paper trail that's created is as good as individual ID,” Mosher explains. “Most producers in a brand state don't always know how much information is recorded within the normal course of livestock commerce.”

And, it's all information that could be entered into an electronic database. “Even on the ‘no-brand’ cattle, we have documentation of their movement,” he adds.

North Dakota's brand system, with modifications, will save producers millions of dollars each year while accomplishing the goals of national traceback, Mosher says.

“We're not saying we don't need national traceback capabilities beyond brands, we just want what we've been doing for 100 years recognized,” he adds.

Mosher admits brand systems aren't 100% accurate or reliable, and there is a failure rate. He also recognizes how important traceability is in today's cattle business.

“The incursion of a foreign animal disease in this country could create an economic impact far beyond the cost of any ID system we'll put in place,” he says. “I'm not sure how it's all going to shake out, but we need the assurances that a workable ID system will provide.”

Making a case for brands

Marc Bridges, Helena, executive secretary for the Montana Board of Livestock, is adamant brands have a place in a traceback system. And, he has a case in point of how a brand system can work in an emergency scenario.

In May 2003, he successfully traced forward (and back) the lives of the yearling Angus bulls that had been herd mates of Canada's “index” BSE cow. Using a combination of import permits, and Montana's brand records database, he tracked the movement of the bulls through five other states.

Then using those states' brand records, Bridges was able to verify the time and place where all five bulls were subsequently slaughtered — all in about an eight-hour timeframe.

“It doesn't always work as well as it did in the case of those five Canadian bulls,” Bridges admits, “but, by and large, with brands we can achieve intrastate and interstate traceability in pretty short order, and without a lot of cost to the producers.”

Plus, Bridges says, Western ranchers, cattle traders and their stocker and feedlot customers have gained respect for the active brand programs.

“For the most part, they trust the brand infrastructures and the people who run them,” he says.

Idaho's state veterinarian, Clarence Siroky, sees livestock brands as one segment in the evolution of a national traceback system. While he agrees brands have a place in the traceback picture, he's not sure brands can cut the mustard alone.

“The goal of 48-hour traceback can't be accomplished routinely with a brand system,” Siroky says. “I'm not saying brands will be relegated to something you just hang by the fireplace but, over the long haul, we need to have other things in place that will do far more than what's intended with a brand.”

Beyond the regulations

Siroky is also adamant that as ID and traceback systems evolve, “business” will have to drive them.

“In the end, I think the business aspects of animal traceback and ID will become more important than the regulatory requirements we're being exposed to today,” he says. “What's going to drive this is a ‘What's in it for me?’ approach.”

Siroky believes it will take up to 10 years for all the pieces of the U.S. ID/traceback puzzle to fall into place.

“The result will be a system that accomplishes both the business and regulatory goals needed in today's livestock marketing climate — much as brand systems have done for more than a century,” Siroky says.

Even in states like Wyoming where the grip on the branding iron is alive and well, cattle producers are reaching for new ideas. Like Siroky, WSGA leadership recognizes there must be a link between the business goals and traceback goals of an ID system.

In April, WSGA began sponsoring a herd management program designed to assist producers in collecting and warehousing data electronically via an online database.

“The WSGA leadership looked carefully at several electronic programs available over the past year,” Magagna says. “It was the officers' unanimous decision that we'd support software and services that offered a producer-friendly system with the flexibility to meet the future needs of Wyoming's cattle industry.”

Magagna says the system isn't a step toward national animal ID, “but, it does offer the technology to meet the demands of such a system, if adopted.”

Tweaking the system

What legal modifications must be made to fully implement a brand inspection system that will allow for 48-hour traceback capability? The North Dakota Stockmen's Association has proposed these changes to its state brand law in order to do just that. Among them are:

  • A premises ID number must be on the brand inspection certificate.

  • Brand inspectors must be allowed to have access to market and dealer information (invoices) to assist in the traceback process.

  • At some point, mandatory brand inspection may be required for private treaty sales within North Dakota rather than transferring ownership via a bill of sale.

ID registration by state

Below is a list of state departments of agriculture and other agencies that may be handling premises registration and individual animal ID numbers. Contact your respective state for more information on ID registration.

For Biosecurity's Sake

Utah livestock owners are being encouraged to help protect their animal production industries by registering their premises as part of the National Animal Identification System (NAIS). The voluntary program is needed to help protect American animal agriculture from the intentional or accidental introduction of a foreign or domestic disease, says Mike Marshall, state veterinarian.

“We encourage owners of cattle, sheep, swine and other livestock to fill out the premises registration form that's now available and return it to our office,” he says.

Marshall emphasizes the program will be administered by the same Utah animal industry employees who livestock owners have come to know and trust — and that no personal or financial information will be gathered in the premises ID process.

NAIS is a voluntary national program intended to eventually individually ID all agricultural animals and track them as they come into contact, or are inter-mixed, with animals other than herdmates from their premises of origin.

One step closer

“Already, many species in U.S. animal industries can be identified through some sort of ID system, but these systems are not consistent across the country,” explains Terry Menlove, bureau chief for livestock inspection for the Utah Department of Agriculture and Food (UDAF). “This program brings us all one step closer in a long process of establishing a workable national ID system.”

The UDAF anticipated the startup of the program and is one of a handful of states prepared to issue premises ID numbers. The registration system includes information such as contact name, address, type of premises and phone number of the person in charge of the premises. Key pieces of information will be sent to the national premises information repository so it will be available in the case of a disease traceback.

“We asked USDA to come out set us up so we can keep our own departmental account,” Menlove explains. “We chose to keep the premises registration system in-house. That way the producer can to come to us in person, contact us via phone, through the regular mail or register through e-mail.”

After a producer submits the premises registration form (available online at www.ag.state.ut.us/animind/Utah_NAIS.html) with the required information, UDAF takes care of the actual registration process. When UDAF gets the premises allocator number back from USDA the agency will send the number to the producer.

“That's our function at this time,” Menlove says. “It gets the producer a seven-digit number that's recorded in the national system — that's all.”

Private and confidential

Menlove assures the Utah livestock industry that the premises registration system is private and confidential.

“There isn't anything contained in the premises information that isn't already in our brand book or information that's normally publicly available anyway,” he says. He's careful to point out that premises registration is voluntary.

“However you keep your own records is your business to share with anyone or not to share with anyone,” Menlove adds. “This system simply allows producers to participate in a national system of individually identifying animals if and when necessary.”

Utah will tie the producer's brand number to the premise numbers. There is flexibility built into the registration system for producers who aren't sure yet how they want to deal with specific premises. If a producer wants to register only one premise at this time, that's okay, Menlove says. If he or she wants to register other sites at a later date, they can do that, as well.

“The program is currently operating under a federal grant making the system free to the public,” Menlove says. “We're uncertain how long such grants will be available to the UDAF and how long the program will remain free to the public.”

No black helicopters

“Down the road,” Menlove says, “this is all going to take us to where we need to be in achieving national traceback goals.”

But, will agents from the federal government be able to come onto a rancher's premises if a “hot” cow, for example, is traced back to his or her location?

“That's going to be our job. In Utah we'll be calling the shots,” Menlove explains. “But, we won't come swooping down in black helicopters.”

He adds Utah animal health officials will work closely with the appropriate federal agencies if a problem animal is traced back to a premises. The UDAF will oversee quarantines, movement restrictions or depopulation if necessary to contain a foreign animal disease outbreak.

“I've never heard anything otherwise, and it's really no different than the authority we, as Utah's animal health authority, have had for years anyway,” Menlove says. “It's really not that complicated or covert, when you come right down to it.”

Utah is also part of the Northwest Individual Identification Pilot Project, which was chosen as one of 29 USDA-funded projects designed to help develop producer-driven animal ID efforts around the nation. Livestock producers in Washington, Oregon, Idaho, Utah, Nevada, California and Hawaii will enroll 12,000-15,000 cattle in the next two to three years, slowly adding bison and sheep to the system.

Initially, Menlove says, Utah ranchers plan to identify 5,000 head of cattle as part of the pilot program. They will use the premises allocator numbers that UDAF is presently helping producers obtain.

Premises registration underway

Premises registration for the National Animal Identification System (NAIS) is beginning in some states. The NAIS is comprised of three major steps: premises registration, animal ID and animal tracking. In July, USDA selected the Wisconsin Livestock Identification Consortium (WLIC) to serve as the prototype for premises registration for the NAIS. WLIC's system is available as the interim premises registration system for states that choose to use it and applies to all types of livestock.

Approximately 25 states have requested the standardized model, and those not yet online are awaiting training to operate the software in their own states.

Here's a sample of some states' premises registration programs:

Wisconsin

A new law signed by Gov. Jim Doyle in April requires any location where livestock congregate be registered with the Department of Agriculture, Trade and Consumer Protection (DATCP). That includes commercial farms; animal markets; animal dealers and haulers premises; slaughter, rendering and dead animal plants; and livestock exhibitions. It also includes fairgrounds, hobby farms, backyard poultry flocks and veterinary clinics.

“Wisconsin's livestock premises registration lays the foundation for rapid response in the event of an animal disease outbreak,” says Rod Nilsestuen, DATCP secretary. “Our mandatory premises registration system will become effective in November 2005.”

Premises registration information will be kept in a confidential database accessible to animal health officials. Voluntary premises registration is already operating with more than 2,000 registered as of early October. The system was developed by the WLIC, a public-private partnership that includes the state ag department along with livestock organizations.

Go to: www.wiid.org

Illinois

The Illinois Department of Agriculture (IDOA) is implementing the NAIS. Registering premises or location doesn't obligate anyone to participate in the animal ID phase of the plan.

The IDOA has begun identifying every farm, feedlot, sales barn, production site, feedyard, livestock market and slaughter facility that handles food animals. It has established an online registration process, which takes about 15 minutes, to identify food animal facilities. After the form is submitted, the facility is issued a federal premises ID number.

IDOA's goal is to identify every food animal facility by Sept. 1, 2005, says Colleen O'Keefe, manager of IDOA's food safety and animal protection division. Registered facilities should include farm-raised wild and exotic animals, such as deer and emu, used for food.

Officials assure participants that registering a premises does not increase liability. Instead, they say, it actually provides a level of protection for agricultural investments. They also assure information will be kept private in a secure database where participants hold control of personal information by establishing a username and password.

Illinois is part of a five-state consortium developing and implementing the national animal ID system in the Great Lakes region. Other participating states are Wisconsin, Michigan, Indiana and Ohio.

Go to: www.agr.state.il.us/premiseid/

Nebraska

The Nebraska Department of Agriculture (NDA) has taken its first step in establishing complete individual animal ID through the Nebraska Animal Verification Enhancement (NAVE) system. NDA is encouraging those who handle livestock, poultry and other food animals to register the locations where their animals are kept.

The premises registration system can be accessed at www.animalid.us. System prompts will take registrants through a five-step process. Once complete, the information is electronically forwarded to NDA for verification.

There's also an option on the Web page to download the form for completion and mailing. Those wishing to register, but without Internet access, can call NDA at 800/572-2437 to receive the registration paperwork.

Minnesota

Minnesota is currently developing a system to collect the location of every livestock premises in Minnesota along with contact information for producers. The state has begun validating more than 50,000 premises currently in the Minnesota Board of Animal Health (MBAH) database. When the validation is completed, each premises will be assigned a national premises ID number and notified of the change.

The state also will begin an educational campaign to inform livestock producers about NAIS. Minnesota plans to enlist the help of many stakeholders including veterinarians, veterinary clinics, auction markets, laboratories, universities, other state agencies, associations, packing plants, etc.

As part of the initial project, MBAH will collect and transmit animal movement data from some Minnesota farms, auction markets and packing plants. A pilot project is being developed to test the use of RFID in swine and beef herds to track individual animals and groups.

Go to: www.bah.state.mn.us/index/nais/nais.htm.

For a list of all state agriculture departments, which will be responsible for handing out premises and individual animal ID numbers, go to page 40.

Who Holds the Cards?

“Who will have access to our information?” is the question the beef industry needs answered as the framework is being laid for the National Animal Identification System (NAIS).

“The primary concern of our members and producers is the confidentiality of the data,” says Allen Bright, a Nebraska beef producer, National Cattlemen's Beef Association (NCBA) chairman of the Animal ID Commission and a member of the U.S. Animal Health Association Beef Cattle ID Working Group.

Government regulators and industry leaders are trying to determine that answer as discussions continue on developing NAIS. One of the biggest impediments to reaching consensus is who controls the ID database — the government or a private third party.

“Our members have said, in policy, that we want the database privately held,” Bright says. “We've been very clear about that, and everyone knows the way we feel.”

For NAIS to work as a voluntary program, which is how USDA is currently promoting it, it will need to have a very high industry participation rate. Of course, the government must be involved in the program in order to access information immediately to monitor and track animal diseases, which is the program's purpose.

But some livestock producers worry about such personal data falling into the hands of competing producers or packers. Then there's concern about access by such government agencies as the Internal Revenue Service, the Bureau of Land Management or the Environmental Protection Agency. And what about folks who might not have the best of intentions toward animal agriculture?

Industry arguments

One proponent of a privately held ID database is NCBA. The organization's membership believes the industry will derive more value-added results from creating a private database system.

“There are tens of thousands, if not hundreds of thousands, of cattle already in various programs at different levels across the country,” says Jay Truitt, NCBA executive director of legislative affairs. “We think it's possible for us to provide for USDA the opportunity to access those systems, and it still requires for them to have some framework that provides some national standards and national guidance at some level.”

Truitt says the industry is already beginning to dictate the need for a national ID system, and he believes that market pressures will be enough to move producers to begin tracking their cattle.

Bright says the industry would also like the database to stay in the hands of a private third party because of information ownership issues.

“It's a very basic argument and comes to the core of American beliefs and rights as U.S. citizens,” he says. “That information is ours.”

Bright adds that if USDA holds and controls the information, ownership is essentially transferred to them.

The coin's other side

USDA representatives, on the other hand, contend it's important for the database to remain in government hands. It is necessary, they say, for the government to exercise greater control over monitoring, as well as accessing information when it's needed to track animal disease.

USDA believes that to achieve its goal of 48-hour traceback of all animals exposed to infectious and contagious diseases, the database needs to be managed within the government.

“The authority the USDA is relying on for our animal ID system is our Animal Health Protection Act,” says Nancy Bryson, USDA general counsel.

She says under that statute, USDA's Animal and Plant Health Inspection Service (APHIS) is charged with protecting the nation's herds and flocks from infectious and contagious diseases, or eradicating such diseases if they are introduced or detected. Those diseases include brucellosis, tuberculosis, BSE, Exotic Newcastle Disease, and Johne's, as well as foot-and-mouth disease (FMD) and high-path avian influenza.

Beth Johnson, senior advisor to the ag secretary, points out the information USDA is seeking is limited to an animal's premises number, individual ID number and its movements through the industry chain up until it is harvested.

“Our very specific purpose is to find out quickly what animals and premises might have been exposed to disease,” Johnson says. “We are not seeking access to the type of marketing data that producer groups are generating in their work with private entities in the retail sector. Those programs offer the industry an opportunity for value-added programs, but are not necessary for animal disease control.”

Phase one of building the database is already underway with the effort to identify premises. Bryson says that as of November about 21,000 premises had been registered in the data system housed by APHIS.

The FOIA question

But, just who will have access to that information?

“I think people who argue in favor of a private ownership model prefer it because it would avoid the possibility that such information would be subject to the Freedom of Information Act (FOIA),” Bryson says.

FOIA mandates that records under the custody or control of federal executive agencies be released upon request, unless they have been ruled exempt from release under FOIA. FOIA doesn't apply to private entities. An exemption to the disclosure requirement is trade secrets and commercial information. Bryson says it's easier to justify applying this exemption if the information is provided voluntarily to the government, which is currently the case with the ID database.

“I've been asked in several hearings whether I can guarantee that information will be considered exempt. I can say how USDA would treat the information, but I can't guarantee the outcome. That's because USDA is not the final arbitrator of this decision, the courts are,” Bryson says. “If we withhold the information, the requester can go to court and challenge the decision. We can reasonably predict the outcome and assume a court will uphold our decision, but we cannot guarantee what any court will do.”

Recognizing this, USDA sent legislation to Congress in October designed to provide further clarity about how information in the federal animal ID system would be treated. It's a fairly simple bill that essentially protects the information of the animal ID system from disclosure, and defines who, and under what circumstances, would have access to it, if USDA manages it.

“The bill would allow the Secretary of Agriculture to disclose the information to partners in the disease eradication control program. When we respond to an animal disease, we do it in partnership with state and local health authorities,” Bryson says.

The bill would exempt NAIS from federal FOIA laws, similar to the exemption provided mandatory price reporting. The bill would also preclude state and local governments from disclosing under their FOIA laws any information relating to animal ID that they receive from USDA.

A few states, such as Kansas and Utah, already have laws in place outlining state animal ID systems, and protecting the information from disclosure. These laws could serve as models for other states interested in taking similar action.

Congress has not held any hearings on the bill or scheduled it for mark-up. Bryson says that, as with all legislation, a robust debate on the details should be anticipated.

Agree to disagree

While USDA maintains it's in the best position to manage the data, NCBA officials continue to back their membership's decision to push for third-party data management.

Bryson says she's confident in USDA's security system and feels the information will be well protected.

Truitt adds: “We just disagree, and at some point it becomes a political issue. That doesn't mean that in the meantime we still don't need to keep working together on all areas where we know, regardless of the outcome, that we need to be cooperative with each other.”

The liability factor

As the beef industry continues to build the National Animal Identification System (NAIS), producers still have concerns to be addressed before NAIS can move forward. Among them is the potential for increased producer liability.

Mifflinburg, PA, beef producer, Crystal Bollinger, testified before USDA officials in September. She asked USDA to make sure producers are protected from any undue liability that could result from NAIS.

“Producers are worried they might be forced to share liability for food safety problems that are now limited to meat merchandisers,” she said. “The U.S. animal ID system must protect producers from liability acts of others after livestock leave our control.”

On the federal level, says Nancy Bryson, USDA general counsel, producers shouldn't have any liability concerns.

“Our animal ID system is being created under the Animal Health Protection Act, which doesn't have any liability for tort action in it,” she says.

Where liability concerns may exist, she says, is on the state level where individual state laws vary. She says some states are taking a proactive approach in addressing liability and confidentiality in legislation.

Kansas, for instance, passed legislation recently that says producers will be held to a standard of ordinary care in liability cases, Bryson says. And, that standard of ordinary care will be presumed met, unless there is evidence to the contrary.