The Murky Murk Demand And Supply Analysis

"The Murky Murk"

by

Wes Ishmael, Contributing Editor

Beef Magazine

October 2006

Mandatory livestock ID systems have been a subject focused on repeatedly in beef farming magazines this year. NAIS (National Identification System) is designed to track livestock for animal health purposes, with the ultimate aim to be able to track any head of livestock or any lifetime production group of livestock back to all previous locations of residence within 48 hours. The goal is to protect the beef industry and prevent vulnerabilities that exist with regard to highly contagious cattle diseases like foot-and-mouth disease. Scott Stuart, NIAA (National Institute of Animal Agriculture) Chairman of the Board, sums it up best: "Our shrinking world, due to rapid travel and international commerce, makes the probability of a foreign animal disease infecting our nation's animals just that much more likely. NAIS, in whatever form it finally takes, is something we must have . . ." At this point, the industry as a whole isn't arguing about the necessity of such a system; but instead is looking for answers to questions such as how much will systems like this cost, will this be mandatory, and when will the system have to be implemented. The answers to these questions will impact the economy of the beef industry greatly.

Different livestock species are represented by an appointed working group that is supposed to provide USDA with recommendations about how NAIS should be implemented relative to the species they represent. Some groups have already submitted their recommendations (i.e. Cattle Industry Working Group - CIWG.) Groups such as CIWG still await an answer from USDA on their recommendations, and the timeline for NAIS implementation remains a mystery. USDA's plan calls for having all livestock premises registered by early 2009, along with all livestock born that year NAIS-identified, and 60% of the animal-movement data reported for livestock in commerce and less than one year of age. The uncertainty gives producers little incentive to participate, but there may be other economic incentives for participating.

Obviously, cattle producers need to minimize cost in order to maximize profit, so the cost of such a system is of great concern. An ID system would be subject to economies of scale (per head cost would become lower for larger herds because the price of equipment and software could be spread across more cattle.) Thus, this represents a more significant cost for smaller producers, and could end up forcing some small producers out of the industry if made mandatory. Since the significant impact would be on smaller producers, overall supply of beef in the US should not be dramatically affected. In addition, it is essential that the system operates in such a way that it does not significantly slow the normal commercial operation of the industry.

Producers able to implement an ID system early would have an advantage. Cattle diseases have been a big topic in the news in recent years, so health and age verification would allow producers to charge a premium for their beef. It stands to reason that US consumers would be willing to