While the U.S. Department of Agriculture continues work on a national livestock identification program for animal disease purposes, another level of traceback — source verification — continues to evolve in the beef industry. This move, however, is more market driven, and therefore certain information can mean premiums or greater market access for producers that can provide and verify that information.
“Source verification has become increasingly important to the beef industry,” says John Nalivka, president and owner of Sterling Marketing Inc., a livestock and meat industry consulting firm, and principal of Sterling Solutions, a firm approved by USDA to provide third-party beef industry source verification, age verification and traceability services. He explains that a system managed by the government or industry and focused on disease containment is not the same as a system focused on marketing.
Other countries have implemented national identification programs to address animal-health concerns; however, some are expanding on that to provide greater value to producers who implement the programs as well as end users. In Australia, for example, a source-verification system has been linked to the national animal-identification system. Producers can choose to add more data, with limited access, beyond just a premises location and contact information. With controlled access to certain information fields, participants can access genetic, production, carcass and end-product information. That information can then be used by producers to improve their cattle and to provide better beef for a particular market.
As other countries expand source-verification programs, it becomes more important for the United States to implement source-verification programs. “The U.S. beef industry needs voluntary source verification if it is to instill trust throughout the entire beef-supply chain, from the time a calf is born until the final beef product is presented to the consumer in the retail meat counter or restaurant, whether it be in the domestic or export market,” Mr. Nalivka says.
Demand for source-verification
There are certain pieces of information about each animal that can bring greater premiums or more marketing options. One example is age verification, which is in demand right now. Cattle under a certain age have greater marketing opportunities overseas as export markets open, so producers who can provide and verify that information have greater demand for their product.
“We currently have a market for every source-verified animal we can obtain, but we believe the time is coming when every animal we purchase will need to be source verified,” says Warren Mirts-ching, vice president of food safety and quality assurance at Swift & Co.
Those cattle, in most cases, can demand a premium for producers that know the value behind the source verification. That, however, is expected to change as cyclical supplies of cattle and beef grow. Then source verification may become necessary for market access.
“Today, our company is offering a premium for individual animal age and source verification,” says Steve Hunt, chief executive officer of U.S. Premium Beef, a marketing company that provides U.S. beef producers an opportunity to retain ownership of the beef they produce, from the ranch to retail. “Obviously, we can only do that to the extent there is a market that will pay us a premium for the beef products from those animals.”
Right now, source verification is a piece of the overall beef market. Mr. Hunt cautions, however, that one day most consumer markets will want source-verified products; then, it simply becomes a practice that must be done in order to participate.
The question for many is, “Do U.S. consumers really want source-verification?” The answer is that many consumers already think beef can be traced back to the ranch of origin.
“In our research, consumers already believe that we can trace everything we sell back to the source,” says Robert Cannell, supply chain director for McDonald’s. “In reality, we can trace those beef patties back to the packer, but it’s difficult beyond that point.”
He adds that consumers already believe that beef products are safe and wholesome and that the animals are treated well, so they don’t want to feel guilty about eating beef. “We don’t want consumers surprised when we can’t meet their expectations and they lose faith.”
Consumer expectations led to the development of a branded-beef product for one retailer. Rich Diturno, director of manufacturing for Heinen’s Fine Foods, says the retail chain in Ohio started a branded-beef program several years ago — Heinen’s Own Beef and Pork. The beef is provided and verified by PM Beef Group, and that verification allows Heinen’s to assure customers that certain management practices have been followed. Because of that verification, Heinen’s pays a premium for that product but can justify it by selling to consumers at a higher price point.
When the BSE case occurred in Washington, Mr. Diturno was on the phone with a consumer who said she didn’t want her family to eat beef. He then explained Heinen’s process-verification program, and that helped persuade her that she could feel reassured about the safety of the branded beef. As branded-beef programs grow, so will the demand for source-verified cattle and beef to fill those programs.
The United States is part of a global market where many countries can provide beef to fill growing demand among consumers. Most of those countries selling beef on the world market have trace-back systems in place — except for the United States. In order to keep export markets, many believe the United States needs to be willing to meet export market expectations on source verification, or other countries will step in and fill the void by meeting requirements.
“We believe source verification will become increasingly important as the Japanese market reopens and U.S. processors try to deliver what that market wants,” Mr. Hunt says. “How much more important source verification becomes in the next few years depends on a lot of factors that might affect how consumers, both domestic and international, view the quality and safety of the beef they purchase.”
In other countries, consumers have lost faith that their governments will provide safe food products. The BSE outbreaks in Europe and Japan are examples of how consumers do not trust the government. Those governments then implemented animal identification and testing to help regain consumer trust. U.S. consumers, on the other hand, seem to trust that the government and beef industry are able to provide a safe product, so there hasn’t been a strong push by consumers for such a system.
Australia’s source-verification system is helping the country stay and grow in the Asian export markets. Once trade is opened to the United States, a lot of ground must be made up in order to regain pre-2003 export levels to those countries.
Then it becomes a matter of jumping through the hoops to regain market share. Although much of this remains in the hands of trade negotiators, it expands the notion of giving consumers, including export consumers, what they want. Some believe that source verification may not be necessary to get into markets, but not having it may limit our ability to compete with other countries for beef exports.