Ontario industry looks at impact of COOL repeal

Thursday, December 24, 2015

by SUSAN MANN

The market for hogs and beef cattle should quickly return to a fully integrated one in North America now that the United States Country of Origin Labelling law has been repealed, Ontario observers say.

But the number of Canadian animals going to the United States for finishing or processing will likely be down compared to the years before 2008, the first year COOL was implemented, because the Canadian cattle and pig herds are smaller now.

The U.S. Omnibus Appropriations Bill passed by both the House of Representatives and Senate last week repealed the country of origin labelling requirements for muscle cuts of beef and pork as well as for ground beef and pork. The law was in place since 2008 and required products to be labelled with their country of origin along with where they were processed and slaughtered.

Canada and Mexico successfully challenged the law at the World Trade Organization and Canada was set to retaliate with $1 billion annually in tariffs on a variety of American imports when the U.S. government repealed the law.

Kevin Grier, Guelph-based agriculture and food market analyst, says there will be some adjustment time before the market is fully integrated again “but I can’t see it being very long.”

The legislation “helped to reduce the (American) demand” for Canadian livestock, he says. “After COOL, the demand should improve for Canadian livestock. However, it’s just one part of demand.”

Grier explains the sow herd has been cut by 25 per cent during the past 10 years so “it’s not as if we’re going to jump back to 10 million pigs heading south again because COOL is gone. We just don’t have those supplies any more.”

On the beef side, Northumberland County cow-calf farmer Dan Darling says, “there’s not the cattle to flow the way that they used to (before COOL was implemented). However the interest in trading in Canadian cattle will be back to where it used to be now that COOL has been repealed if for no other reason than the strong American dollar compared to the Canadian dollar.”

He notes the stronger American dollar “will make our cattle extremely attractive” to U.S. packing plant buyers.

As well, with segregation of animals and the associated costs now by the wayside, “common sense would tell us they (American packers) would be able to pay a little more for the Canadian cattle now.”

Darling, vice president of the Canadian Cattlemen’s Association, notes a major American beef packer, Tyson Foods, Inc., has already told Canadian beef officials it would be resuming trade with Canada “like it was prior to COOL.”

Patrick O’Neil, Ontario Pork marketing division manager, says how quickly industry reacts will vary by company.

O’Neil says the law’s repeal will give Ontario pigs farmers “more options to sell animals, which is going to create a more competitive environment. It should be helpful to prices but it’s not a silver bullet.”

O’Neil declined to disclose the exact number of pigs Ontario Pork currently ships to the United States, but did say “it’s significant.”

Whether Ontario Pork would up shipments to the United States now that the law is repealed, O’Neil says there “will be seasonal factors” that affect its decisions on where pigs go. “We’re going to be making those decisions based on what the best opportunities are.”

He adds that “I would expect there would still be an advantage to keeping pigs closer to home if there’s the ability to process them here.”

Grier says the barrier created by COOL for the past seven years was real because American processor industry paid “more to handle Canadian livestock than it did to handle U.S. livestock” and more than it did prior to the implementation of COOL. “It cost more for segregation, sorting, labelling and the logistics for running the plant,” he says.

Many American plants stopped handling Canadian livestock due to the added costs, he notes. “If they did handle them, they would have to discount” the Canadian animals.

O’Neil says the rules applied to the retail level but they had implications on how meat had to be segregated through the supply chain up to and including the live animals.

U.S. Agriculture Secretary Tom Vilsack said in a Dec. 18 statement posted on the United States Department of Agriculture (USDA) website effective immediately the USDA was not enforcing the COOL requirements for pork and beef. In addition, it will be amending the COOL regulations “as expeditiously as possible to reflect the repeal of the beef and pork provisions.”

About the number of animals heading south now that COOL has been repealed for beef and pork, Grier says there should be an increase because the serious impediment of COOL and the higher costs are now gone. However “there’s not going to be a rush of cattle because we (Canada) don’t have a rush of cattle. Hogs should start to find more willing homes there (in U.S. processing plants) probably more rapidly than on the cattle side because of the greater supply availability.”

The first development will likely be U.S. finishers welcoming Canadian weaner and feeder pigs, he notes. BF