Report from Tonsor and Schroeder finds mandatory COOL causes meat industry, consumer losses

Based on a study commissioned by the USDA, economists report that compliance leads to billions in net economic costs

Any policy that results in higher costs of compliance without a quantifiable benefit will likely have an adverse economic impact, and recent research shows mandatory country-of-origin labeling, or MCOOL, is one such policy.

The U.S. Department of Agriculture (USDA) assigned the research, based on a requirement in the 2014 Farm Bill to quantify the market impacts of MCOOL. The requirement included studying both the implementation of MCOOL in 2009 and a revision of the policy in 2013.

Agricultural economists Glynn Tonsor and Ted Schroeder from Kansas State University and Joe Parcell from the University of Missouri completed the research and issued the full report (http://www.agri-pulse.com/Uploaded/USDACOOLEconomicReport.pdf) to government officials May 1.

The researchers found no evidence of meat demand increases for MCOOL covered products—those products sold at retail locations such as supermarkets. Because general meat demand has not increased, and the meat industry as a whole has experienced lower quantities and higher costs to implement the additional labeling procedures, MCOOL has led to net economic losses.

Industry stakeholders and consumers negatively impacted

Tonsor said the research involved compiling literature from MCOOL studies and other non-peered reviewed information such as comments regarding cost impacts. The researchers used economic models to quantify price and meat quantity estimates over the next 10 years based on the 2009 and 2013 rulings. They compared those findings to 2008, which provided estimates if MCOOL had never occurred.

“We estimated the beef industry’s 2009 impact was an economic loss of $8.07 billion over 10 years,” Tonsor said. “For the pork industry, it’s a $1.31 billion loss.”

Tonsor pointed out that approximately 16 percent of pork and about one-third of beef production is covered by MCOOL, as some products such as those sold in restaurants are not required to bear the label. MCOOL covered beef would have to see at least a 6.8 percent increase and covered pork a 5.6 percent increase in demand to avoid an adverse economic impact.

Results also showed consumers to experience net losses—$5.98 billion for beef and $1.79 billion for pork—over 10 years due to higher retail prices and lower retail quantities available every year.

The researchers had to study 2013 separately because the MCOOL policy changed. The 2009 ruling led to labels such as “Product of U.S. and Canada” showing up on a package of beef, for example. The 2013 ruling required that same package to read more specifically, “Born in Canada, Raised and Slaughtered in the U.S.”

“We added the specificity of ‘Born, Raised and Slaughtered’ stages in 2013, which means additional costs with additional precision,” Tonsor said. “But, it’s not the same level of costs as we had the first round in 2009. There’s an incremental additional cost, but it isn’t as large as the original cost to be in compliance.”

The additional impact of the 2013 rule was another $494 million loss to the beef industry and $403 million loss to the pork industry over 10 years. Demand increases would need to be at least another 0.4 percent for beef and 1.6 percent for pork on top of the 2009 estimates to avoid an adverse economic impact.

Consumer losses were another $378 million for beef and $428 million for pork based on the 2013 revision.

The poultry industry, he said, was the only one to show a gain. Those gains for 10 years were $753 million for 2009 and an incremental addition of $67 million for 2013. The gains, however, were narrow compared to the billions in losses to the beef and pork sectors that mean a total loss for the meat industry as a whole.

“The main reason is (the poultry sector) doesn’t have the same cost of compliance, so at the retail level there is some shift away from more expensive beef and pork prices over to poultry products,” Tonsor said. “That serves as a pull for more production on the poultry side, and the poultry industry benefits.”

What the future has in store

The World Trade Organization is expected to make an announcement later this month about the future of MCOOL. Some groups and political leaders believe the USDA should repeal MCOOL, while others advocate that the United States has the right to label origin on foods sold in the country.

Tonsor said another approach is to make the policy voluntary.

“Our report and the literature synthesis in it points to a voluntary approach being better,” he said. “Watching this situation, I agree that voluntary labeling would be an improvement from where we are now. It’s hard for me to say if politically that is where we will be a year from now or three years from now.”

To access the full report, visit http://www.agri-pulse.com/Uploaded/USDACOOLEconomicReport.pdf. A video interview with Tonsor is available on the K-State Research and Extension YouTube page (https://www.youtube.com/watch?v=OvXMoJk5o4o&feature=youtu.be).

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Story by: Katie Allen, K-State Research and Extension – katielynn@ksu.edu or 785-532-1162

For more information: Glynn Tonsor – gtonsor@ksu.edu or 785-532-1518

This news release from K-State Research and Extension is posted at http://www.ksre.ksu.edu/news/story/mandatory_COOL050615.aspx.

K-State’s College of Agriculture Celebrates Success and Looks Ahead to a Productive Future

Dean John Floros presented his second annual State of the College of Agriculture address March 25.
Kansas State University’s College of Agriculture aims to be a top-five agricultural college in the United States by 2025, and in collaboration with K-State Research and Extension, it intends to continue serving as a global destination for education, research and extension. Reaching this feat not only would benefit the university, but it would benefit the citizens of Kansas and beyond with immediate solutions to needs in agricultural production.

Agriculture is Kansas’ largest economic driver, as it contributes $53 billion to the Kansas economy and is the state’s largest employer, said John Floros, dean of the college and director of K-State Research and Extension.

In his third year as dean, Floros presented his second annual State of the College of Agriculture address March 25 on K-State’s Manhattan campus. He discussed celebrating successes that are getting the college closer to a top-five agricultural college, some of which include growth in the number of students, faculty and staff success, competitive funding, research expenditures, private fundraising, and the college’s national and international reputation.

On the heels of more cuts in state funding, the college has been able to counter these budget cuts and embrace change, Floros said. Aside from the amount of state funding available, all other numbers continue to go up, which is why he is optimistic that the college will continue to experience success in the future.

“K-State will remain here, but change will happen,” Floros said. “We will have to change, and if we are ahead of change and anticipate it, we are better off. Let’s anticipate budget cuts and figure out ways to counter those.”

Students in Sean Fox’s class get a taste of the pit in his trading class!

Teaching and learning
K-State’s College of Agriculture has experienced steady growth in all student metrics. In 2014, the college had 2,780 undergraduate students—525 more than in 2010, which showed 2,255 undergraduates. The number of multicultural students in the college has doubled in the last five to six years, with a total of 291 in 2014. This means more than 10 percent of undergraduate students are multicultural.

Floros reported 695 undergraduate students call states other than Kansas home. These students represent 44 other states. Eighty-three undergraduates come from 19 other countries.

The college is nearly equal in the number of male and female undergraduates: males at 51 percent and females at 49 percent. Along with higher student enrollment, there has been an increase of 54 percent in scholarships provided in the last four years. Scholarships awarded in 2014-15 totaled $1.34 million.

Nearly all undergraduate students find jobs following graduation or pursue graduate degrees. The college has a 97 percent placement rate for students in jobs or a graduate education.

“It’s an exciting time to be a student in the College of Agriculture,” Floros said. “Every time I talk to our students that excitement comes through.”

Graduate students in the College of Agriculture are also on the rise. In 2014, there were 590 graduate students compared to 481 in 2010. Floros called this a huge success that helps the college meet its teaching, research and extension goals.

K-State’s Collegiate Crops Judging Team recently won its sixth straight national championship, and in fact, it has won 13 of the last 16 championships. In its first year competing, K-State’s Agronomy Forage Bowl Team won the national competition in 2015. Students are studying abroad in countries all over the world such as Argentina, Brazil, Ireland, France, India, South Africa, Spain and Japan.

Mykel Taylor presents Farm Bill updates in February of 2015 in Wichita. The K-State Farm Bill Team reached more than 4,000 Kansans during 14 meetings held across the state!

Research and extension
The College of Agriculture, with K-State Research and Extension, have identified and are working toward solving five grand challenges for Kansas, which include global food systems, water, health, community vitality and developing tomorrow’s leaders. Other colleges at the university also are helping improve the livelihoods of Kansans in finding solutions to these challenges.

Floros recognized the college’s work across the state to help farmers make better management and farm policy decisions. Kansas State continues to develop the top wheat varieties used by Kansas’ farmers. A fungal genetics center that moved to K-State last fall will help the Department of Plant Pathology and wheat breeding programs continue to become more successful.

Plant Pathology is one of the several nationally ranked programs from K-State’s College of Agriculture. In fact, the Department of Plant Pathology is ranked No. 1 nationally. The agricultural economics program comes in at No. 4, interdepartmental food science at No. 9 and plant sciences at No. 10.

The animal science doctoral program for research productivity recently received a No. 5 national ranking, and the entomology doctoral program has been ranked No. 8. The Department of Grain Sciences and Industry at K-State is unique, Floros said, as there is no other department like it anywhere else.

Extramural awards for research in K-State’s College of Agriculture totaled $46.3 million in fiscal year 2014, which has increased steadily the last few years from $23.8 million in 2011. Floros said total K-State Research and Extension expenditures were at $142 million in 2014, an increase of 8 million from 2011 and 17 million from 2010.

Many faculty and students in the College of Agriculture are working with new programs funded by the U.S. Agency for International Development, or USAID. These four new Feed the Future Innovation Labs were funded in total by $102.2 million. The labs focus on research surrounding sorghum and millet, applied wheat genomics, postharvest loss reduction and sustainable intensification. Only Kansas State and the University of California-Davis have received four such new USAID labs.

Top K-State faculty members specializing in agricultural related areas continue to be recognized nationally and internationally with awards in teaching and research. Many are also selected to lead national organizations related to horticulture, weed science and entomology, as examples.

Private fundraising also was up in 2014 for the College of Agriculture and K-State Research and Extension at $14.5 million. This is more than triple the amount from 2009, which was $4.4 million. Increases in private fundraising will help meet the current and future costs for programs, research, new facilities and facility upgrades, and other needs of the college.

“The bottom line remains that we need new facilities,” Floros said. “We need new state-of-the-art labs, teaching facilities, extension facilities and distance education facilities. We have to push for this happening now. We need to prioritize our needs.”

A video of Floros’ full presentation can be found on the K-State Research and Extension Seminars website. Learn more about the College of Agriculture at www.ag.k-state.edu and K-State Research and Extension at www.ksre.ksu.edu.

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Story by:Katie Allen katielynn@ksu.edu / 785-532-1162 / K-State Research and Extension

For more information: John Floros, dean, K-State College of Agriculture – floros@k-state.edu or 785-532-7137