Possible Producer Benefits from a National Animal Identification System NAIS

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Possible Producer Benefits from a National Animal
Identification System (NAIS)

• Prepared by
• Dr. Ruby Ward
• Assistant Professor
• Extension Economist
• Economics Department
• Utah State University
• Email ruby.ward_at_usu.edu

Western Extension Marketing Committee
Western Center for Risk Management Education
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Can the National Animal Identification System
Benefit Cattle Producers
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Outline

• Benefits 3 categories
• Food safety
• Bioterrorism
• Increased production information

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Food Safety Bioterrorism

• BSE in Canada and United States
• Highlighted the need for an animal tracking
  system
• Increased threat of Bioterrorism
• Highlighted need for NAIS
• Trace back of infected animals within 48 hours of
  detection.
• How does this benefit producers?

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Food Safety Bioterrorism

• Trace infected animal within 48 hours
• Quick isolation
• Increased consumer confidence

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Exports and Prices

• Exports are 8-10 of beef production in the U.S.
• Drop in exports has a larger drop in price
• Price elasticity is -.62 (Huang 1996)
• This measures the percentage change in quantity
  for a 1 change in price
• Price Flexibility of 1.5 1.6
• Inverse of price elasticity measure the
  sensitivity of price to changes in quantity.

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Exports and Prices

• Exports are 8-10 of beef production in the U.S.
• Price Flexibility of 1.5 1.6
• Inverse of price elasticity measure the
  sensitivity of price to changes in quantity.
• Drop of 9 in demand would cause price to drop by
  15 (1.69)
• Similar to what happened in market after BSE
  announcement in December 2003

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Food Safety and Bioterrorism

• Lower wholesale and retail prices for beef will
  be passed on to the cattle producer.
• Program that supports demand in event of food
  safety or bioterrorism crisis
• Will help producers

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Increased Production Information

• More information flowing along marketing channel
• Marketing Channel Stages a product passes
  through
• Cow/calf producer
• Feedlot
• Packer
• Retailer

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Commodity Vs. Differentiated

• Commodity
• All products seem the same
• Low price is important
• Differentiated Products
• Some products can be perceived as higher quality
• Usually sell for a higher price
• If more information is attached, the product may
  be able to sell it for more

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For Example

• Selling a 500-pound calf
• Commodity sells for market rate
• If higher probability this calf will perform well
• Would finish faster
• Grade higher than other calves
• Then calf is more valuable and could get a
  premium price.

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Higher quality herd

• Information about carcass yield, feedlot
  performance etc. could be linked to a particular
  animal
• That information could flow back to the producer
  (usually a fee is attached)
• Producer could use it to selectively cull the
  herd
• Herd quality and performance could increase

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Pricing on a Grid

• Only a portion of animals currently being priced
  based upon performance
• Should increase in future
• Some feedlots may require information as a market
  entrance requirement
• Animal ID could be key to market access

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Verifying Information

• Some product characteristics require third party
  verification
• NAIS can facilitate by being able to track and
  audit the animal through the system.

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Producer Benefits of Information

• More information can flow along marketing channel
• Can Differentiate products
• Can use information to improve herd quality
• Easier to do audits

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Conclusions

• May be some liability issues
• Decrease risk of food safety or bioterrorism
  threat
• More information flowing along marketing channel
• Improve herd quality
• Add verifiable characteristics
• Differentiate products