Economic impact of country-of-origin labeling in the U.S. beef industry

Concerns over the total costs assessed to the beef industry from the implementation of mandatory country-of-origin labeling (COOL) regulations warranted an investigation into the estimation and distribution of marketing and marginal costs of production for retail chain stores and distributors, meat packers and processors, cattle feedlots, cattle backgrounding yards and cow-calf producers. Furthermore, it is thought the implementation of COOL will impose severe market and social welfare effects on the participants in the beef industry. This research focused on two main objectives. The first objective is to provide a full beef industry cost assessment for implementing COOL regulations based on the preliminary guidelines for COOL as published by the United States Department of Agriculture in the proposed rule in October of 2003. Financial and production data was collected and used from U.S. retail chain stores and distributors, meat packers and processors, cattle feedlots, and cattle backgrounding yards and stockers. The second objective was to use the weighted average cost estimates calculated from the data to determine the magnitude of increases in the demand for retail beef, wholesale beef, fed cattle, and feeder cattle needed to negate the increase in costs of implementing mandatory COOL regulations. An equilibrium displacement model was used to demonstrate the supply and demand functions and relationships for retail beef, wholesale beef, fed cattle, and feeder cattle. Estimated elasticities for retail beef, wholesale beef, fed cattle and feeder cattle were used to calculate the relative changes in price and quantity in response to the COOL-induced supply and demand shifts. The quantity intercepts from the estimation of the linear parameters can be used to calculate the increases in consumer demand needed to negate the increases in costs estimated from the survey results for the retail, wholesale, fed cattle, and feeder cattle sectors of the beef industry. A significant cost burden to the beef industry was shown by the weighted average estimates calculated from the research. Retail chain stores and distributors, meat packers and processors, cattle feedlots and cattle stockers are expected to see an increase in marketing and marginal costs of production as a result of implementing COOL.