Farmscape Article 3068  December 18, 2009

Canadian pork producers are breathing a collective sign of relief following the release of the final rule for U.S. mandatory Country of Origin Labelling (COOL).

The new American food labelling law compels American grocers to identify a range of food products at retail according to their country of origin. Covered commodities include muscle cuts and ground beef, lamb, chicken, goat and pork; wild and farm-raised fish and shellfish; perishable agricultural commodities, including fresh and frozen fruits and vegetables; macadamia nuts; pecans; ginseng and peanuts. Processed products and products destined for export are exempt.

USDA Announces Final Rule

Last week (January 12, 2009) the United States Department of Agriculture (USDA) issued details of the final rule which will take effect March 16, 2009, replacing the interim final rule which has been in effect since September 30, 2008.

Key changes will allow U.S. meat processors a greater degree of flexibility when handling animals from more than one country.

Agriculture Minister Applauds Revisions

Speaking to reporters from Hong Kong, federal agriculture minister Gerry Ritz applauded the amendments.

“Industry leaders in both Canada and the United States have consistently made the point that the border does not exist for the livestock industry. Failing to recognize that reality would have added huge costs and red tape for Canadian producers and their livestock heading south,” says Ritz.

Ritz notes, while the final rule includes provisions allowing American products to be labelled as exclusively American, it includes the option to label products as Canadian and American if it comes from livestock generated in both countries.

Changes Offer Flexibility in Commingling

In both the interim and final rule, meat from animals born, raised and processed in the U.S. qualifies as, “Product of the United States,” or label A. Meat from animals born in Canada but raised and processed in the U.S. qualifies as “Product of the United States and Canada,” or label B. Label C designates meat from animals imported from Canada for direct U.S. slaughter.

Under the revised final rule, American processors will have greater flexibility to mingle meat from Canadian origin animals raised and processed in the U.S. with meat from U.S. origin hogs under label B and the ability to also include label C meat under the B label.

Consultation Results in Recognition of Shortfalls

“It’s very clear that some people in the U.S. have recognized the damage that this COOL legislation is actually doing,” says Canadian Pork Council President Jurgen Preugschas.

He says, while the revised legislation appears to offer greater flexibility, it’s too early to know what its impact will be until we hear what the U.S. processors are prepared to do.

“We’re glad to see this final ruling come out,” states Baldur area pork producer and Chairman of Manitoba Pork Council Karl Kynoch. “We’ve been looking for this for the past month.”

Interim Rule Limits Canadian Access to U.S. Markets

Kynoch observes the interim rule has resulted in a fairly heavy push back on the direct for slaughter hog, anything leaving here at 250 pounds.

“A lot of the packers announced that they weren’t going to carry three labels and they had actually already stopped buying those direct for slaughter hogs.”

Florian Possberg, a director on the Saskatchewan Pork Development Board and the Canadian Pork Council’s (CPC) representative on the Board of Directors of Canada Pork International (CPI) notes, “The major packing plants, Cargil, Hormel, Tyson, all were concerned about whether they could incorporate Canadian hogs into their production runs.”

Possberg concedes producers are still not certain that the processors will be able to do that but it appears they will and the hope is that is what will happen.

The uncertainty has also reduced U.S. demand for Canadian early wean and feeder pigs resulting in discounts for Canadian feeding pigs in the U.S. since September when the interim rule took effect.

“We’ve heard cases of Canadian pigs being discounted up to $9.00 (per animal) for feeders and early wean pigs and we would hope most of that discount would disappear,” says Possberg.

He’s confident, “If we have a number of competitors competitively bidding for Canadian hogs then there really shouldn’t be much of a discount for our animals in the U.S.”

Decisions Rest with U.S. Packers, Processors and Consumers

Kynoch agrees, “What remains to be seen is how are the packers going to react to this and how are the retailers going to react to this? At the end of the day it’s going to be up to the packers whether they want to produce two separate labels.”

Still Kynoch considers the release of the final rule to be a step forward.

“Now that the final ruling is out, at least everybody knows what the playing field is and they know what to do for their business plans going forward.”

Request for Consultations Shelved

Meanwhile Canada’s request for formal consultations with the U.S. over COOL under the World Trade Organization dispute setting mechanism is being shelved at this point.

Ritz notes, “We’ll continue to monitor the implementation of COOL, we’ll continue to assess what the mandatory labelling is doing to us. We may have to do some advertising to make sure the Canada brand is better known in the U.S. We all know that we have an equal if not superior product and we’re not afraid to say that in the U.S. market.”

Concerns Heard and Acted On

Possberg believes communication was an important factor in bringing about the changes.

“We made some of our views known to the U.S.Mexico made their views known to the U.S. We know that there were also producers in the U.S. that benefit from business with Canada and Mexico. We know that slaughter plants wanted to have more flexibility so it appears to us that they listened to some of the concerns around the North American market and have responded at least somewhat positively and that’s very beneficial to us.”

Ritz points out, Canada made numerous interventions with the American congress, officials with the federal government worked with the livestock industries here in Canada and their allies, the livestock industries in the U.S., to promote the fact that this is an integrated market. He believes the U.S. regulators recognized that and have made the required changes for Canada.

Reasonable People Offer Reasonable Solution

Possberg agrees, “There is some appreciation that there is a North American Market in that both cattle from Canada and Mexico and hogs from Canada going into the U.S. is good business for the U.S. It makes us more competitive on a global basis.”

He stresses, “We’ve built a market around good business principles. They were trying to peddle this as a food safety thing. For many, it was, but for some it was just a trade impediment. We’re glad that reasonable people in the U.S. have come to what we hope is a reasonable solution.”

Staff Farmscape.Ca