Benefits and Costs Associated With An Animal Identification System for Cattle in the United States

1
Benefits and Costs Associated With An Animal
Identification System for Cattle in the United
States

• Prepared by
• DeeVon Bailey, Ph.D.
• Professor
• Department of Economics and Cooperative Extension
  Service
• Utah State University
• Email dbailey_at_econ.usu.edu

Western Extension Marketing Committee
Western Center for Risk Management Education
2
Why Is an Animal ID System Being Implemented in
the United States?

• BSE case of December 2003
• Other reasons some directly connected to BSE
  and some indirectly connected
• Purpose of this presentation is to discuss
• Reasons for implementing animal ID
• Potential benefits obtained from an animal ID
  system
• Potential costs associated with an animal ID
  system

3
Evolution of Animal ID Programs in the United
States

• National Identification Work Plan (NIWP) first
  official public effort to examine animal ID in
  the US
• The US Animal Health Association accepted the
  NIWP in October 2002
• Asked USDA, APHIS to develop a team to develop an
  implementation plan
• This implementation plan became the US Animal
  Identification Plan (USAIP)
• Has since evolved into the National Animal
  Identification System (NAIS)
• Basically same as USAIP
• Same blueprint for numbering and standards for
  data flows
• Radio frequency identification (RFID) not
  recommended technology in the NAIS
• Both emphasize animal disease control as the
  reason for implementing animal ID

4
Animal Disease Control

• BSE is a concern
• However, other animal diseases such as FMD and
  Brucellosis may be even greater dangers to the
  economic health of the US cattle industry
• The ability to track animal movements will aid in
  locating the source and spread of animal diseases
• Implementation of the NAIS depends on the
  cooperation of state departments of agriculture
  (state veterinarians)
• Individual states responsible for premises
  identification
• SDAs will also probably be involved in issuing ID
  numbers for premises and animals

5
Food Safety and Bio-Security

• Traditional food safety systems were designed
  assuming the greatest risks for food borne
  illness (bacterial contamination) occurred at the
  processing or food preparation levels
• BSE is a fundamentally different problem than
  bacterial contamination
• thought to originate with farm level inputs
• traditional systems not designed to identify BSE

6
Food Safety and Bio-Security Continued

• Cattle change hands often (5-6 times on the
  average during an animals lifetime)
• Long incubation period for BSE means that an
  animal has likely changed hands several times
  before symptoms begin to express themselves
• Need to track locations where animal(s) has been
  and herd mates to identify feed sources and other
  potentially sick animals

7
Bio-Security

• Other types of contamination may be limited, or
  at least contained, if a tracking system is in
  place
• Unintentional contamination
• Intentional contamination (bio-terrorism)
• A role for both the private and public sectors
  exists to ensure food safety

8
Market Preservation and Market Development

• Some of the USs principal competitors and
  customers have or are in the process of
  implementing animal and meat tracking systems
• For example, the European Union (EU), Canada,
  Japan, Australia, and New Zealand
• Several economic studies have suggested that
  there may be important economic reasons, besides
  for controlling animal disease, for implementing
  an animal ID system
• Consumers may be willing to pay more for meat
  products that are traceable
• Some consumers may be willing to pay for other
  characteristics, besides traceability, that can
  be verified using animal and meat tracking
  systems. Examples include humane animal
  treatment, environmental responsibility, and
  social responsibility

9
Different Traceability Definitions

• EU legal definition for traceability is EU
  General Food Law Reg. EC No. 178/2002 The
  ability to trace and follow a food, feed,
  food-producing animal or substance intended to be
  or expected to be incorporated into a food or
  feed, through all stages of production,
  processing and distribution.
• Many American agribusiness firms consider this
  definition to be broader than what is necessary
  to achieve specific food safety or quality
  assurance goals.
• Desire for more flexibility
• Customize rules to meet specific goals

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Why Different Traceability Systems Exist

• EU suffered a massive breakdown in consumer
  confidence as a result of its BSE crisis in the
  1990s
• In general, European consumers have less
  confidence in government to assure food safety
  and quality than do Americans
• The European BSE crisis was on a much larger
  scale than the BSE crisis in the United States
  and Canada
• In an effort to restore consumer confidence, the
  EU wanted to impose strict accountability at
  every level of the marketing chain

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Precautionary Principle

• The EU has applied the Precautionary Principle
  (PP) to public food policy
• PP suggests that short-term food policy decisions
  may have unknown, long-run consequences, but are
  often made without conclusive scientific evidence
  of the absence of any long-run harm.
• Precaution should be exercised in developing food
  policy without conclusive scientific evidence
• GM debate
• Traceability debate
• Labeling debate
• Doesnt necessarily mean a food product in
  question cannot be sold, but may call for strict
  labeling requirements

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Sound Science vs. the PP

• The sound science argument contends that as long
  as no scientific evidence of harm exists, that
  food products should be considered safe
• The PP argues that food products should not be
  considered safe until the absence of harm has
  been proven
• American food industry has resisted the PP
• Restrictions can be applied even in the absence
  of scientific proof of harm
• The restrictions principally affect products
  imported into the EU and are, in fact, trace
  barriers
• Rise of dichotomous systems in world meat markets
  some systems with traceability and some without

13
Estimated Costs of Implementing Animal ID

• USAIP estimate - 500 million for first six years
  (all species included)
• Sparks Companies Inc. (cattle only)
• Capital investment 140 million
• Annual variable costs 108 million

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Estimated Costs at the Cow/Calf Producer Level
Annual Cost/Cow
Source Blasi et al.
Size of Cow Herd
15
Estimated Annual Costs for a RFID Feedlot
Operation
Annual Cost/Head
Number of Head
Source Blasi et al.
16
Who Will Benefit from the Implementation of
Animal ID Systems?
Survey results for leaders of state cattle
producer associations taken from Bailey and Slade.
17
Producer and State Veterinarian Attitudes

• Desire flexibility want market solutions rather
  than mandates
• State veterinarians see animal ID principally
  as a critical need for animal disease control
• Most positive perception by both supporters and
  non-supporters of the USAIP (NAIS) relates to its
  ability to control animal disease
• Supporters of the NAIS had a more positive
  perception about its ability to aid in assuring
  food safety and preserving international markets
  than did non-supporters
• Non-supporters believe that downstream firms
  (packers and retailers) will benefit more from
  animal ID programs than producers
• Issues relating to additional liability that
  might be passed on to producers have not yet been
  fully addressed. This may help explain the
  reluctance on the part of some producers to
  support the NAIS

18
Summary and Conclusions

• Animal ID is a controversial issue
• Significant questions about animal ID need to be
  answered
• How liability will be shared
• How costs of implementation will be shared
• Appropriate technologies
• Despite these challenges, animal ID programs
  offer some potential benefits
• Controlling animal diseases
• Standardizing beef trade in world markets
• Expanded niche market opportunities

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Summary and Conclusions Continued

• Precise form in which animal ID will be
  implemented is still somewhat cloudy
• A significant commitment to implement animal ID
  exists on the part of industry and government.
  This should aid greatly in its success.