Washington Insider-- Tuesday

Food Safety and the Law Enforcement Challenge

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

EU Responds To US Move On EU Ban On Hormone-Treated Beef

The European Union (EU) has met the commitments in a 2009 agreement with the U.S. on imports of hormone-free beef, an EU official said in a statement. The push back was in reaction to U.S. officials saying U.S. beef had been denied EU market access despite the U.S.-EU Memorandum of Understanding (MOU) on High-Quality Beef, which is beef raised without growth-stimulating hormones. “The EU has fully complied, both in the letter and in spirit, with the Memorandum of Understanding signed with the United States in 2009, establishing a hormone-free beef quota,” the EU official said in response to Dec. 22 statements by the Office of the U.S. Trade Representative.

“The termination of this agreement and the possible application of duties on EU exports to the U.S. would certainly constitute a most unfortunate step backward in the strong EU-U.S. trade relations,” the EU official said, adding that the EU will continue to implement the memorandum of understanding and stands ready to listen to any concerns of the U.S. administration.

USTR said that non-U.S. exporters of high quality beef products have been able to fill “a substantial part” of the EU's 45,000 metric ton duty-free quota. While the quota is not reserved for the U.S., the cuts of meat specified in the MOU correspond with grain-fed beef. Reports note that the EU is allowing Argentine and Australian producers of grass-fed beef to fill the quota with their high-quality beef products. In practice, USTR said in the notice, the quota has not provided enough “benefits to the U.S. beef industry sufficient to compensate for the economic harm resulting from the EU ban on all but specially produced U.S. beef.”

As for the Transatlantic Trade and Investment Partnership (TTIP) implications, the EU official said, "Changing the EU's ban on hormone-treated beef was never part of the negotiations with the United States for a trade agreement." Both sides have signaled the TTIP talks will not culminate in the near future. USTR said in its December 22 statement that the European Commission “had argued that this issue should be resolved through TTIP.”

Antibiotics Sales for Use in US Farm Animals Rose in 2015: FDA

U.S. sales and distribution of antibiotics approved for use in food-producing animals increased 1% from 2014 to 2015, the U.S. Food and Drug Administration (FDA) said in an annual report. An estimated 70% of antibiotics used to fight human infections and to ensure the safety of surgery and other invasive procedures are sold in the U.S. for use in meat production. In 2015, sales and distribution of those medically important antibiotics for food production rose 2%, the FDA said.

Medically important antimicrobials accounted for 62% of the domestic sales of all antimicrobials approved for use in farm animals in 2015. Tetracyclines accounted for 71% of such sales, FDA said, noting the data also include drugs approved for therapeutic purposes.

"The more we use them anywhere, the less effective they become," said Dr. David Wallinga, a physician and senior health officer at the Natural Resources Defense Council.

Some food outlets have switched to serving chicken raised without antibiotics important to human health. Some investors are pushing McDonald's and other major food companies to do the same for all of the meat they produce, purchase or serve around the world.

Washington Insider: Food Safety and the Law Enforcement Challenge

Like many news organizations, Food Safety News is featuring a look back at the big news stories of 2016 and highlighting the role criminal investigations played.

For example, the number 5 story of the year is the Jack DeCoster case—a family business name also linked to environmental, labor, and food safety violations from Iowa to Maine, FNS says. Each DeCoster pled guilty to allowing adulterated food from their egg production facilities in Iowa getting into interstate commerce, and each agreed to pay $100,000 fines. A near-record $6.8 million fine was also paid by their Quality Egg Corp., which pled guilty to two felonies and the same misdemeanor with which each DeCoster was charged, a case that could end up before the US Supreme Court, FSN says. It also is intended to get the attention of other management folk who may be tempted to cut food safety corners.

The organization points out that while the new Food Safety Modernization Act’s rules went into effect when the President signed it into law in 2011, it has only recently begun tackling the nation’s food safety problems during 2016 “when all seven of foundational rules to implement the new law were finished.”

The program’s “actual starting point” remains where it has been for been for a while—about 48 million illnesses or 1 in 6 Americans sick from foodborne diseases each year. The federal Centers for Disease Control and Prevention says 128,000 people require hospitalization and 3,000 die.

The Act’s foundational rules include: Preventive controls for human foods; Preventive controls for animal food; produce safety; foreign supplier verification; third-party certification; sanitary transportation; and intentional adulteration. All are now effective, although there are staggered compliance dates and enforcement dates, depending on business size and other factors.

So, one aspect of what we are seeing is the federal enforcement of rules against poor food safety practices. Perhaps the poster child in this area of preventative controls has been Chipotle — which FSN say is “finding out how much food safety failures cost.”

FSN says Chipotle founder Steve Ells posted a photo of himself handling food bare-handed when he announced new food safety measures for the burrito chain. More recently, he again demonstrated inappropriate food handling during a “Today Show” segment in a Chipotle kitchen when he poked meat on the grill with his bare fingers.

There is a lot that’s still unknown about the string of foodborne illness outbreaks among patrons of Chipotle Mexican Grill restaurants in 2015, but one thing became crystal clear in 2016. Bouncing back from burrito blunders isn’t as easy as founder Ells said it would be.

For example, the latest in the series of six 2016 Chipotle outbreaks wasn’t declared over until February 2016. By then the Denver-based fast-food chain’s stock had dropped from its all-time closing high of $557.77 in Aug, 2015, to below $400. By June, 2016, analysts said they thought the stock would bottom out at $384.77 per share, but it dipped even lower in recent weeks.

Through 2016 the chain’s founder predicted customers would return. He and the company gave away free food, retrained employees in food handling and hand hygiene, imposed an automatic closure protocol in the event of anyone vomiting at a restaurant, floated new product ideas, gave away more free food and made the talk show rounds.

Still, the third-quarter numbers did not bear out Ells predictions. Net income for Q3 was only $7.8 million, compared with the previous year when Chipotle took in $144.9 million net.

Whether changes at the top, made in late 2016, will boost the chain to its earlier glory will be revealed Feb. 2, 2017, when the fourth-quarter results are reported.

Those changes include billionaire investor Bill Ackman of Pershing Square Capital Management picking up a 9.9% stake in the company; the resignation of Monty Moran who had been co-CEO since 2009; and the installation of four new board members.

The bottom line impact of civil lawsuits brought by more than 100 of the more than 500 people sickened in the Chipotle outbreaks will remain unknown as confidentiality clauses in settlement agreements gag all parties.

FSN has a message in all this, of course, and that is that government efforts to improve food safety by requiring private firms to manage and pay for the costly tests and inspections necessary are succeeding. Certainly, the FSN list of “top offenders” for the year dramatizes the seriousness of the legal challenges to managers who fail to respond. How effective these new “enforcement” approaches to food safety will prove to be, and how soon they will show up in the safety statistics should be watched closely by producers as the industry responds, Washington Insider believes.

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN’s Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the US Ag Policy, US Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@dtn.com