Animal ID: Opportunities for Value-Added Marketing and Production Efficiencies

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Animal ID Opportunities for Value-Added
Marketing and Production Efficiencies

• Prepared by
• Kynda R. Curtis
• Assistant Professor and State Specialist
• Department of Resource Economics
• University of Nevada Reno
• E-mail kcurtis_at_cabnr.unr.edu

Western Extension Marketing Committee
Western Center for Risk Management Education
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Presentation Outline

• Overview
• Why might a national animal ID system be
  important?
• How might an animal ID system impact my bottom
  line?
• Case examples
• Summary
• Web resources

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Overview

• Animal traceability system motivation
• Minimize liability and bad publicity of food
  borne illness
• Traceability systems isolate source and scope of
  food safety
• Reduce recall costs
• Additional benefits to all members of food
  distribution system
• Access to new markets
• Price premiums
• Production efficiencies

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Why Might a National Animal ID System be
Important?

• Traceability systems such as animal ID
• Facilitate trace back during food-borne disease
  outbreaks
• Minimize liability and potential bad publicity
• Governmental food safety standards in the U.S.
  reduce food safety hazards
• Increased food safety risks
• Food imports (foods produced overseas)
• New food production technology
• Biotechnology

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Case Examples

• StarLink
• Genetically modified corn product not approved
  for commercialization in U.S.
• Possible human allergen
• Environmental activist group proved StarLink
  introduced into human food supply
• Resulted in costly recall program
• Mad Cow Disease (BSE) December 2003
• Holstein cow in south-central Washington State
• Resulted in two month investigation, 28 of 80
  cohort cows traced back
• Many overseas markets now closed to U.S. beef
• e.g. Japan and Korea

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The National Animal Identification System (NAIS)

• Track animals from slaughter to herd or premise
  of origin
• Identification numbers for animal, herd of
  origin, and premise (ranch) of origin
• Record system of animal movement
• Assure consumers of U.S. beef safety levels

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How Might an Animal ID System Impact My Bottom
Line?

• Provide access to new markets
• Overseas markets
• Product quality attributes
• Provide access to price premiums
• Value-added markets
• Aid in production efficiencies
• Herd management
• Improved profits

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Consumers and the NAIS

• Food quality characteristics
• are important to consumers
• Rising consumer incomes in developed countries
• Studies show as income and education rises diet
  quality improves
• Consume more fruits, vegetables, chicken, etc.
• Consumers now spend more money on quality foods
  and food away from home
• Seek assurances from food industry regarding food
  safety and other quality attributes

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Value-Added Markets

• Consumers willing to pay more for high-value
  products
• Contain requested quality attributes
• Quality attributes/characteristics
• Process oriented
• Growth enhancers, pesticides, feed, animal
  treatment.
• Content oriented
• Fat content (lean), marbling, bacteria and/or
  disease free

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Credence Characteristics

• Many quality attributes are credence in nature
• Credence characteristics can NOT be discerned by
  physical inspection
• Consumer uncertainty regarding the existence of
  the attribute
• Seek quality assurances from industry and
  government agencies

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Price Premiums

• Studies show consumers willing to pay premiums
  for
• Food safety
• Specific nations/areas of origin
• Natural/organic production
• Humane animal treatment
• Traceability systems allow for process and
  content attribute verification

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Case Examples of Companies Requiring Traceability

• McDonalds, Jack in the Box, Red Lobster
• Purchase meat from processors which ensure high
  food safety standards
• Rewards include guaranteed sales contracts and
  premium pricing
• Seek evidence of safety procedures through
  record-keeping
• McDonalds plan to have 10 of beef purchases
  source traceable by end of 2004

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Case Examples of Companies Using Traceability

• Maverick Ranch
• Natural and organic products
• 3rd party testing for antibiotics, growth
  hormones, and pesticide residue
• USDA certified organic label
• Coleman Natural Meets
• Free range grazing, natural grass feed
• No hormones or antibiotics
• Humane animal treatment
• USDA approved natural beef label

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Case Examples of Companies Using Traceability

• Farmland Industries
• Farmer-owned cooperative
• USDA processed verified logo
• Process verification system
• Genetics
• Animal nutrition
• Animal health and welfare
• Safety measures
• Environmental protection
• 100 traceability of all products in program

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Production Efficiencies

• Traceability systems enhance producer ability to
• Track animal performance from weaning to
  slaughter
• Identify most profitable genetics
• Herd management
• Sell low performing cattle
• Reproduce identified high performance genetics

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Example Case of Production Related Efficiencies

• Ranchers Renaissance
• Cooperative of ranchers, stockers, feeders,
  processors, and retailers
• Market Cattlemans Collection, Harris Rancher,
  and Ranchers Reserve brands
• Use electronic ID system since 1997
• Efficient and economic way to collect data on
  each animal and share with all partners
• Data includes animal source, process, and genetic
  verification
• Increased revenues by 2-3 per hundred-weight on
  each calf

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Summary

• Consumers seek high-quality foods
• Uncertainty surrounding quality and safety levels
  due to credence nature
• Traceability systems may reduce consumer
  uncertainty
• Consumers willing to pay for greater traceability
• Access to new markets
• Increased pricing (premiums)
• Production efficiencies gained through increased
  information

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Web Resources for Relevant Information

• Maverick Ranch
• http//www.maverickranch.com
• Coleman Natural Meats
• http//www.colemannatural.com
• High Plains Journal
• http//www.hpj.com
• U.S. Animal Identification Plan
• http//www.usaip.info
• Choices Magazine
• http//www.choicesmagazine.org