An analysis by university ag economists contracted by USDA has found that the economic benefits of mandatory country of origin labeling would be insufficient to offset the cost of the requirements.
Although consumers desiring COOL information benefit from its provisions, there is insufficient evidence to conclude such benefits translate into measurable increases in consumer demand for beef, pork or chicken, the economists reported.
In addition, economic models indicate consumers over the long run face higher beef and pork prices, leading to fewer purchases, due to the increased cost of production resulting from COOL implementation, they reported.
The increased costs of complying with mandatory COOL “results in economic losses to producers, packers, retailers, and consumers and leads to a smaller overall industry with higher consumer prices and less product available,” the economists stated.
The analysis was done to meet a congressional directive in the 2014 Farm Bill that USDA conduct an economic analysis of its 2009 and 2013 COOL rules and report back to Congress.
The analysis was performed by Glynn Tonsor and Ted Schroeder of Kansas State University and Joe Parcell of the University of Mississippi.
The economists’ findings are consistent with USDA’s prior analyses that measurable benefits from mandatory COOL would be small despite substantial interest in COOL and consumers’ right to know.
COOL requirements apply to retailers and their immediate suppliers, but the information must flow down the entire production and marketing chain starting with farmers and ranchers. Thus, livestock producers face costs for implementing the labeling requirement even though cattle and hogs are not COOL covered commodities.
USDA’s analysis of the 2009 COOL rule estimated incremental implementation costs to producers, packers and retailers at $1.3 billion for beef, $300 million for pork and $183 million for chicken.
Consumers fared no better, with those costs shifting to their grocery bill.
The agency estimated implementation for all covered commodities — which include other meats, fish, fruits, vegetable, ginseng and some nuts — at $2.6 billion. USDA found the long-run impact of cost shifts to the consumer would result in a $212 million reduction in consumer purchasing power in the 10th year following implementation.
The university economists found those cost shifts resulted in economic welfare losses totaling $8.07 billion for the U.S. beef industry and $1.31 billion for the pork industry from net present values.
The poultry industry, however, which was assumed to have no COOL implementation costs and expected to benefit by substitution for higher-cost beef and pork, would see an increase of an estimated $753 million in economic welfare, the economists reported.
Impacts of the 2013 COOL amendments for labeling beef and pork muscle cuts, at an industry cost of $53 million to $192 million, would also result in welfare losses.
Those losses were estimated at $494 million for the beef industry and $403 million for the pork industry over the first 10 years. The poultry industry was expected to gain an estimated $67 million.
Again, consumers fared no better with welfare losses totaling $378 million for beef and $428 for pork over the first 10 years, resulting from higher retail prices and lower volumes, the economists reported.