Beef Label Wars

Like a hot branding iron, the repeal of mandatory country-of-origin labeling (MCOOL) left a mark on America's beef business. It's a mark that continues to fester, even seven years later.

"Congress has heard from the countryside on this," says Lia Biondo, director of policy outreach for the U.S. Cattlemen's Association (USCA). "If they haven't heard us, they aren't listening."

It was 2015 when the World Trade Organization (WTO) agreed with Canada and Mexico that MCOOL gave U.S. beef and pork a marketing edge. Those countries threatened an estimated $3 billion in annual retaliatory sanctions against U.S. exports if MCOOL wasn't withdrawn. It was enough to back down legislators who felt the price was too steep for any gain that might be realized.

Texas Congressman K. Michael Conaway, who retired in 2021, was then chairman of the House Agriculture Committee. He said at the time, "The starting point needs to be that mandatory COOL for meat is a failed experiment which should be repealed."

And in fairly short order, it was repealed. Since then, America's cattlemen have continued to press legislators on the issue. Finally, in 2022, the time for change may be here.

REINSTATING MCOOL

The American Beef Labeling Act is one of the most talked-about legislative attempts to reinstate MCOOL. It's something the USCA's Biondo says her group fully supports. But she believes it will take increased pressure from voters to push this bill through.

"We've been shouting that this bill (the American Beef Labeling Act) is something we need to move forward. But being candid, I'm not sure it will move forward. We are calling on producers to reach out to members of Congress and press them on the issue. Unless legislators hear from the countryside continuously and loudly, I don't know if we can move that bill, because there's a lot of opposing pressure."

Sen. John Thune, R-S.D., on introducing the American Beef Labeling Act, said producers in his home state of South Dakota worked tirelessly through the pandemic to continue to produce some of the world's highest-quality beef.

"The pandemic only highlighted their important role in our domestic food supply and the urgent need to strengthen it," he said. "To ensure the viability of cattle ranching in this country, the system in which producers operate must be fair and transparent."

At the time this article was posted, an identical House version of this bill was introduced by Rep. Ro Khanna, D-Calif. It also had bipartisan support.

While the possibility of tariffs still represents a significant barrier to MCOOL, USCA's Biondo notes that the American Beef Labeling Act specifically states any labeling program would have to be WTO compliant.

Along with concerns over tariffs, Biondo says they've heard from processors who insist there will be significant costs tied to sorting out U.S. beef in their facilities if the American Beef Labeling Act moves forward.

"I ask them to look at their record profits," Biondo says in response. "They can certainly afford to give back to the producers in this country."

DEFINING U.S. BEEF

Another legislative attempt to alter today's labeling landscape is the U.S.A. Beef Act. The Senate version was introduced by Sen. Mike Rounds, R-S.D.; the House version was sponsored by Rep. Matthew M. Rosendale, Sr., R-Mt. The two bills are identical and have bipartisan support.

In this case, the phrase, "Product of U.S.A." or any substantially similar word(s) could only be used on beef exclusively derived from one or more cattle born, raised and slaughtered in the United States. It would not apply to product intended and offered for export. This is not mandatory labeling of country of origin but a way to limit the use of words or phrases that imply a product originated in the U.S. when it did not.

On introducing the bill, Sen. Rounds said, "We must fix the current labels to protect consumers and producers. For far too long, South Dakota producers have suffered as their high-quality, American-raised beef has lost value as it's mixed with foreign beef, raised and processed under different standards. This is wrong. Consumers deserve to know where their beef comes from, and accurate transparent labeling supports American farmers and ranchers. It's long past time we fix this once and for all."

MCOOL HAS A CHANCE

For R-CALF USA, the fight to bring back MCOOL has been long and all-consuming.

Bill Bullard, CEO for the group, believes the beef industry is today on the brink of a major shift in labeling, thanks to the American Beef Labeling Act.

"I feel confident we will get MCOOL reinstated, and I'm hopeful this will happen by the end of the year. I can finally say it's now a matter of when, and not if," Bullard says.

R-CALF is throwing all of its support behind the American Beef Labeling Act. Bullard says this is their preferred approach because it requires all beef sold at retail be labeled as to its country of origin. He believes the U.S.A. Beef Act would only limit the ability to continue to "misuse the label."

"Packers have been allowed to use voluntary labels for decades, but they don't because it's not in their economic interest," says Bullard. "We don't believe a voluntary program can be successful."

He says packers today sell beef from up to 20 countries with stickers that indicate it is USDA inspected and quality graded and a product of the USA -- all to unsuspecting consumers. Bullard insists it is not in the meat packers' economic interest to disclose to consumers where their beef is sourced from.

"The packers have tremendous political clout and undue influence, and that's why it's been so difficult to reinstate mandatory country-of-origin labeling for beef," he adds.

THE REGULATORY ROAD

While Bullard is optimistic about the legislative path to reinstating MCOOL, others believe the challenge in doing so is nearly insurmountable. As a result, a regulatory fix continues to gain traction on Capitol Hill.

The USCA's Biondo is hopeful USDA's regulatory process can solve the labeling problem by better defining what "Product of the U.S.A." means in regard to beef. Today, under USDA rules, beef is considered to be a product of the United States if it is processed in this country. The agency announced last year, following a Federal Trade Commission vote, that it will review the label as it applies to meat managed through the Food Safety and Inspection Service.

Biondo believes if there is a regulatory way to close the loophole that allows foreign beef to be labeled as Product of the U.S.A., the industry will be lightyears ahead of where it is today.

Danielle Beck agrees and says this is where the National Cattlemen's Beef Association (NCBA) has been focusing much of its work.

Beck is senior executive director of government affairs for the group. She believes proposals on the table today that would reinstate MCOOL have a low likelihood of moving forward but that there are real opportunities to reform labeling on the regulatory front.

"At NCBA, we think it is a better approach to reform labels that are voluntary, auditable and trade compliant. The current label is misleading, it's generic and it can be used liberally by retailers and packers. We don't believe there is any benefit to the producer with regards to the labeling that is in place today."

On the other hand, R-CALF's Bullard remains resolutely against any labeling program that is voluntary.

"The rulemaking process to ensure that only beef raised here is eligible for the 'Product of the U.S.A.' label would not require any labeling of foreign beef," he says. "We believe that once the American Beef Labeling Act passes, it will negate the need for these voluntary labels. But we recognize these are independent processes. The USDA is working to establish its own regulation, and Congress is looking to intervene legislatively."

THE PREMIUM QUESTION

NCBA's Beck says USDA petitions being looked at now could eliminate the "Product of the U.S.A." label altogether, replacing it with more descriptive terms, like "Processed in the U.S.". But she believes the real value lies in the creation of more verified sourcing labels for America's cattle producers and retailers.

"We think this is the best way to get actual premiums to cattle producers for what they produce," she explains. Beck adds she is concerned that if MCOOL is reinstated, there will be a substantial cost due to noncompliance with WTO rules, which would outweigh any benefits.

"Why do that? It is a questionable approach in our minds, especially when the intention now with the USDA is to reform the label," she says.

Beck believes there is more possibility for premiums at the producer level tied to verified sourcing. According to IMI Global, a company that provides voluntary, third-party verification programs to producers worldwide, there are dollars tied to label claims. They found in a 2019 report that per-head premiums in beef averaged $6 to $25 based on labeling.

Beck adds that as regulatory changes take place, the future for the cattle industry is bright.

"During the height of the pandemic, we saw consumers' perceptions and attitudes change, and demand for beef continued to grow. We want consumers to be able to pick and choose. We don't want a government-mandated program for labeling that forces a label on everyone. It's a disservice to consumers given food prices now, and a government-mandated program won't give a benefit back to our cattle producers either. Rather than relitigating an issue that won't benefit us financially, we have to pivot and find a way to empower producers and consumers. Let the U.S. cattlemen be the marketer of their own product. They are always the best advocate. And then let the consumer, armed with that information, make their own buying decisions."

MCOOL'S VALUE QUESTIONED

Emotions drive a lot of discussions when it comes to MCOOL, but as an agricultural economist at Kansas State University, Glynn Tonsor follows the data. And the numbers haven't really backed up the idea that MCOOL improves demand for U.S. beef.

In 2015, prior to the repeal of MCOOL, Tonsor delivered a 196-page report to Congress on the likely effect of repealing MCOOL. He showed that when MCOOL was active, there was not higher demand for beef or for pork. Tonsor updated his overview of MCOOL in 2019 and came to the same conclusion. Now, in 2022, the question is whether COVID has changed consumers' views on the issue.

"Make no mistake -- meat demand, domestically and abroad, is definitely stronger than it was in 2019, when we released that report looking at demand after MCOOL was repealed," says Tonsor. "Higher demand is not the same as saying consumers have more of an interest in origin labeling. I remain skeptical that people would pay more today based on MCOOL policy than they would pre-COVID."

Tonsor says that in aggregate for the beef industry, he believes reinstating MCOOL will lead to a net loss.

"That's what I showed in the 2015 report, and I think the core mechanics are similar today," he explains.

"It's important to note that of the beef consumed in the U.S., about 15% originates outside of this country. So about 85% of the beef consumed here was produced here. If we move to mandatory labeling, that would have a cost on 100% of the beef sold. It would all have to be sorted and labeled differently, and there is a cost as that animal is slaughtered and tracked and sorted throughout the entire system. So, the cost is on 100% of the beef, but for 85% of the beef, it is just clarifying origin. That is a high burden to offset those costs, and there is no evidence of a demand boost as a result of it."

LABELS AND PALATABILITY

Marketing labels do have a lot of power, though -- even the power to affect palatability. Keayla Harr, a KSU student, did her master's thesis on that premise, and her work had surprising results.

Consumers taking part in Harr's research were provided false labeling information on ground beef patties. They believed that beef labeled as locally sourced was much better in terms of tenderness, juiciness, flavor and texture. The ratings went even higher when they were told the beef was grass-fed and locally produced.

It was all a little trick for the sake of research, however. In reality, all of the ground beef (80% lean and 20% fat) came from the same production lot/day, and it was bought in chubs prior to being made into patties. Each chub went randomly to a consumer panel as patties. Those patties were randomly assigned different label terms, including those indicating the beef was all-natural, raised without antibiotics, raised without added hormones, fresh never-frozen, grass-fed, locally sourced and organic. Consumers were then asked to evaluate the patties for palatability.

The research team, headed by Harr and including E.S. Beyer and K.J. Famer, reported that adding production claims consumers recognized made for a better eating experience. They added that events of 2020 and 2021 have set the stage for consumers to be more adapted to wanting foods that are locally sourced, which are likely a direct cause of the results. The researchers noted there is a perceived "quality halo" around locally produced products, even when, as in this case, there was actually no real difference.

While palatability and demand are two different things, the potential for one to influence the other is clear.

Karr, whose family raises beef in Ohio, says looking at how different labeling could shape the perception of taste and flavor was interesting, and not really something she expected.

"For me, it all goes back to the cues we are giving buyers. Our labels tell the story of our beef, and they create a difference in consumers' minds. I think the telling thing here is that we need to give buyers more choices, and by doing that we can also increase demand for our product."

Victoria Myers can be reached at vicki.myers@dtn.com

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