The Canadian cattle industry is losing business from a major purchaser as Tyson Foods won’t accept cattle directly from the country to avoid added expenses associated with country-of-origin labeling rules.
The decision is likely to increase feeder-cattle exports. Tyson will continue to purchase Canadian-born cattle sent to U.S. feedlots, however the decision removes the third largest buyer from the Canadian fed cattle market.
Tyson says it doesn’t have the space necessary to separate, categorize and label products in line with COOL requirements. The added process would also raise costs.
“These new rules significantly increase costs because they require additional product codes, production breaks and product segregation, including a separate category for cattle shipped directly from Canada to U.S. beef plants without providing any incremental value to our customers,” Worth Sparkman, a spokesman for Tyson, told Businessweek.
U.S. meat packers have voiced opposition to the rule with claims that it will drive up costs and pose a bookkeeping nightmare. Mexico and Canada are challenging COOL before the World Trade Organization which isn’t expected to be resolved until 2015.
Brian Perillat, a senior analyst at Calgary-based Canfax, agrees that the process Tyson would have to enact to track the carcass as it’s broken down to individual cuts isn’t logistically possible.
COOL was approved by Congress in 2002 and became mandatory in 2009. The rules are estimated to cost processors and retailers between $53 million and $192 million in “total adjustment costs” according to Reuters.
The rule is designed to provide more information to consumers as they make purchasing decisions, but added expenses appear everywhere on the value chain from cow-calf producers to consumers.