(Updates with trade-group letter on farm bill progress in ninth paragraph.)
Jan. 27 (Bloomberg) -- Ranch manager Ty Keeling trucks young cattle from as far south as Veracruz, Mexico -- a 30-hour journey along cactus-lined highways -- to be fattened in the Texas pastures he oversees.
Such imports are key to restocking beef herds depleted by a drought in 2012 that parched Texas grassland and forced ranchers to send steers to slaughter early, Keeling, 32, said.
Under U.S. Department of Agriculture rules put in place last year, the meat will have to be labeled as Mexican-born and U.S. slaughtered -- a disclosure that some ranchers and meatpackers say cuts their profit and trading partners say illegally discriminates against their goods.
“We need these cattle,” Keeling said as 275-pound (125 kilogram) calves marked with tags showing they’re from Mexico ate cottonseed cubes from a trough near Boerne, about 40 miles (64 kilometers) northwest of San Antonio. “At some point, we’re going to get to the point where we won’t be able to buy them anymore.”
Canada and Mexico have successfully challenged earlier versions of the label rule at the Geneva-based WTO, which in 2011 and 2012 said the standard unfairly harms meat sales to the U.S. in part by making record-keeping of international cattle too onerous. Canada is threatening to retaliate with tariffs and several livestock groups have gone to court to block the USDA’s enforcement of the tougher new rules.
Country-of-origin labeling “isn’t necessary or right. It’s just creating more work,” Keeling said.
The requirement has split the livestock industry for almost two decades. Some ranchers see it giving them a buy-American edge, while packers say it drives up the cost of their product handling. The biggest U.S. meatpacker, Tyson Foods Inc. of Springdale, Arkansas, in October said it stopped buying slaughter-ready Canadian cattle to avoid the expense of sorting by domestic or foreign origin.
The labeling rules first took effect in September 2008. Last year the USDA tightened them, no longer letting ranchers merely say the beef was from North America and requiring separate disclosures to say where beef, lamb, pork, chicken and goat were born, raised and slaughtered.
Opponents had sought to have legislators ease the label rules as part of the every-five-year rewrite of farm-policy legislation. Those efforts have failed, according to a letter today to farm-bill negotiators by groups including the National Cattlemen’s Beef Association and National Chicken Council.
Tighter country-of-origin labeling also exposes the U.S. to additional trade conflcit, the groups wrote to Senators Debbie Stabenow, a Michigan Democrat, and Thad Cochran, a Mississippi Republican, and Representatives Frank Lucas, an Oklahoma Republican, and Collin Peterson, Minnesota Democrat.
“This retaliation will be crippling to our industries and threaten the long-term relationship with two of our most important export markets,” the groups wrote in the letter. “We will actively oppose final passage of the Farm Bill,” if these issues are not addressed.’’
Advocates embrace the information as useful for consumers.
“It’s not like it’s a new concept,” said Chris Waldrop, director of the Food Policy Institute of the Consumer Federation of America, a Washington-based safety-advocacy group. “Consumers want it so they can make an informed choice.”
Labeling is good for U.S. ranchers, said Stayton Weldon, who raises 300 head of cattle on 2,600 acres near Cuero, Texas, a stop on the historic Chisholm Trail cattle-drive route linking San Antonio and Houston. He said that while meatpackers want fewer regulations to cut costs, consumers deserve knowledge considered routine in other industries.
“Every piece of clothing on your body, you can look at the label and know where it came from,” said Weldon, 75, driving a pickup across land tended by an ancestor, John W. Stayton, a Texas Supreme Court chief justice of the late 1800s. “This truck. I know exactly where it was made. But the most important thing is what you eat -- and why the hell shouldn’t you know where that came from? That’s your health.”
The USDA responded to the WTO ruling last year by eliminating generic labels on meat from North America and requiring identification for each step in an animal’s life. The USDA said the change justifies the paperwork the WTO found onerous, bringing the U.S. into compliance. Canada and Mexico disagree.
The Canadian government has issued a preliminary list of 37 U.S. exports targeted for retaliation by tariff, pending a decision by the trade arbiter, ranging from cattle and wine to welded pipes and mattresses.
The American Meat Institute and several U.S. and Canadian livestock groups sued in July to block the USDA’s tougher version. Almost 7,200 companies, mostly retailers, would have to replace labels unless Congress alters the requirements, the USDA estimated. Tighter labeling rules may cost meatpackers as much as $192 million, according to a government estimate.
Origin labeling is inconsistent, said Janet Riley, a spokeswoman for the Washington-based institute, Unprocessed meat products such as steaks are subject to the labels while processed or restaurant foods such as bacon are exempt, she said. The U.S. is adding short-term cost to packers while it fights a battle at the WTO that it will lose, she said.
“You have a situation where tenderloin must be labeled but bacon is exempt,” she said. “It’s incredibly disruptive.”
Canadian livestock operators have lost an estimated $C650 million ($617 million) annually since 2009. Losses will increase if the revised rules come into effect, according to the Canadian Cattlemen’s Association, based in Calgary.
The value of live-animal imports from Canada, whose herds compete with the northern Plains ranchers who have been vocal on the rules, declined 27 percent to $1.49 billion in 2012 from $2.04 billion in 2008, according to U.S. data. Imports from Mexico more than doubled to $720 million from $301 million, a pace that would slow under tighter USDA rules, Keeling said.
The omnibus spending bill passed by Congress this month “strongly recommends” that the USDA delay enforcing its new, stricter standard. Country labels will be among issues debated as House and Senate lawmakers draft a new five-year farm bill, said Republican Senator Charles Grassley of Iowa.
The American Farm Bureau Federation, the largest U.S. farmer and rancher group, endorsed the label program this month while saying it should be WTO-compliant.
The second-biggest general farm group by members, the National Farmers Union, may withdraw support for at least part of the law should the label language be weakened, the organization said in a letter to negotiators working on a plan.
The National Farmers Union, the U.S. Cattlemen’s Association, the American Sheep Industry Association, the Consumer Federation of America and R-CALF USA, a rancher group on whose board Stayton sits, all opposed easing the standards.
Slaughterhouses balk at taking animals from Mexico or Canada because segregating foreign and domestic livestock disrupts work flow, said David Anderson, a livestock economist at Texas A&M University in College Station.
Surveys show consumers want labels; still, such considerations may not be driving purchases, Anderson said.
“Price still matters a lot,” and more-complicated rules tend to raise prices, he said. “The added costs ultimately get absorbed by everyone.”
Weldon said country-of-origin will help U.S. ranchers, making the future better for the grandson who plans to take over his ranch when he retires. Keeling said labeling may boomerang, hurting everyone’s trade in the long run.
“To me, these cattle aren’t any different from the native cattle,” he said. “When you have trade partners like Mexico and Canada and we say, ‘we don’t want your cattle,’ that’s not a sound way to do business.”
--Editors: Steve Geimann, Jon Morgan