Testimony of John McNutt

President

National Pork Producers Council

Before

The Senate Agriculture, Nutrition and Forestry Committee

COUNTRY OF ORIGIN LABELING

May 26, 1999

Chairman Lugar and Members of the Subcommittee:

I am John McNutt, a pork producer from Iowa City, Iowa and President of the National Pork Producers Council (NPPC). I very much appreciate the opportunity to appear here on behalf of U.S. pork producers to express our views on country of origin labeling.

The National Pork Producers Council is a national association representing 44 affiliated states that annually generate approximately $11 billion in farm gate sales (although farm gate sales were reduced to about $9 billion in 1998 as a result of the lowest hog prices ever in real terms). According to a recent Iowa State study conducted by Otto and Lawrence, the U.S. pork industry supports an estimated 600,000 domestic jobs and generates more than $64 billion annually in total economic activity. With almost 11 million litters being fed out annually, U.S. pork producers consume 1.065 billion bushels of corn valued at $2.558 billion. Feed supplements and additives represent another $2.522 billion of purchased inputs from U.S. suppliers which help support U.S. soybean prices, the U.S. soybean processing industry, local elevators and transportation services based in rural areas.

Background

You have legislation before you that would impose expanded country-of-origin labeling requirements at the retail level by amending the Meat Inspection Act. Under this pending legislation, USDA would be required to identify the origin of imported meat. Cutting of meat into pieces or reworking of meat would not be enough to change the origin of the meat. Indeed, pork derived from imported slaughter hogs would be considered a foreign product under S.19 and S.242.

NPPC Opposes Mandatory Country of Origin Labeling of Pork

At our recent annual meeting with producer-elected delegates from 44 states, a resolution that expresses NPPC's opposition to mandatory country-of-origin labeling was unanimously approved. As a threshold matter in dealing with this issue, pork producers have concluded that mandatory country-of-origin labeling will not help raise hog prices. Indeed, producers are very concerned that mandatory labeling could result in lower hog prices.

For the record, the demographic composition of the delegates showed:

--- Fifty-one percent of the delegates have 200 sows or less.

--- Average delegate age was 44 years old

--- Thirty-six percent sell fewer than 2,000 hogs per year

--- Seventy-two percent market fewer than 10,000 hogs per year

Country of Origin Labeling Could Result in Lower Hog Prices

The situation in the pork industry is unlike the situation in other U.S. livestock sectors in that we have seen pork imports decline sharply since the mid-1980's. At that time we were importing close to 10 percent of our production and exporting less than one percent of our production. Today, we are importing only about 3 percent of our production while we are exporting close to 7 percent of our production. We do not think that such a small and declining level of imports justifies the extensive costs associated with country of origin marking. Moreover, we fail to see how origin marking will raise the price of our hogs.

Country-of-origin marking would require extensive record keeping, segregation and tracking of both imported animals and meat. According to USDA, U.S. consumers purchase approximately 15 billion retail packages of fresh meat and poultry each year.

USDA estimates the annual cost to monitor for compliance of country-of-origin will be $60 million, which represents more than 10 percent of the entire FSIS budget. Enforcement of origin marking would divert resources from food safety, which could undermine HAACP implementation and potentially decrease consumer confidence in the meat supply. A 1987 study by the U.S. General Accounting Office concluded that the benefits gained from additional country-of-origin labeling of food products would not justify the costs of implementation and enforcement of the labeling laws. Without question, the increased packer, processor, retailer and USDA costs associated with labeling will be passed back to the producer in the form of lower hog prices. Clearly, someone must pay for this requirement. We believe that pork producers would shoulder a significant percentage.

For 18 consecutive months U.S. hog prices have been so low as to preclude farrow-to-finish producers to sell above cost. Indeed, at the end of last year prices plunged to all-time lows in real terms. Our producers have lost an estimated $3.5 billion in equity during this economic crisis. We simply cannot support a program that will not raise the price of our hogs or clearly add value to pork.

U. S. Pork Seal---Where You Find the Very Best Pork

When Pork-The Other White Meat campaign was introduced over 10 years ago, U.S. pork producers were announcing their vision of the future. It has proven tremendously successful. Now we have developed the new U.S. Pork seal to represent our focus for the years ahead. This seal is the foundation of an aggressive, long-range program to become the world's preferred supplier of high-quality, low cost pork. Like Colombian coffee, America's pork producers have set their sights on establishing a truly unique, premium position and identity for U.S. pork that is recognizable around the world as the very best.

Consumers around the world are increasing their demands that the food they purchase meets the highest quality and safety standards. In response to those demands, the U.S. pork industry is working everyday to provide global consumers with the pork that meets the most stringent standards for safety, quality, wholesomeness, reliability of supply and value. The U.S. Pork seal is a visible symbol of that effort. We think this approach, rather than attempting to discourage other nation's products from entering the U.S. is the preferred way to advance our farm food production.

Origin Marking is not a Food Safety Issue

Imported products are inspected in the country of origin under a system of inspection that must be equivalent to U.S. inspection if they are further processed. According to USDA, 85 percent of all imported meat and poultry is further processed in the United States.

Most of the hogs imported for immediate slaughter in the U.S. are from Canada while most of the pork is from Canada and Denmark. Absent compelling evidence to the contrary, it is fair to assume that Canadian and Danish pork do not carry negative images in the minds of U.S. consumers.

In fact many products, supermarkets, and restaurants list country of origin as a way of boosting sales. Do any of us really believe that listing products such as Colombian coffee, Danish ham and ribs, Argentine beef, or New Zealand lamb is done for any reason other than to boost sales of those products? That's why we developed the U.S. Pork label to indicate to our customers they are getting a product they know is of unquestioned quality.

Clearly, U.S. consumers have positive images of those imported products or they wouldn't be designated as they are. By requiring country-of-origin labeling we are giving suppliers a free ride in establishing an overall, country identification for their products. In a certain sense, we are giving to them, at U.S. government and private sector expense, the country identity that we seek to establish in foreign markets through the use of the U.S. Pork Seal.

Repercussions in Export Markets

Perhaps most disturbingly, country-of-origin labeling could be used by our competitors to our disadvantage. It invites copycat action and legislation in those countries. For example, another country could determine that importation of an animal from the U.S. that is slaughtered in such country does not confer origin. Thus, U.S. hogs sold live to an entity in another country, slaughtered and processed in that same country, could be sold as U.S. pork product to a third country even though the animal and product had been totally out of our human and animal health control all the while. I don't think we want to export live animals and have the meat product from those animals sold as U.S. origin. Yet the proposed legislation, if enacted, would encourage other countries to do exactly that.

Conflicts with U.S. Position

If adopted, some of the Senate bills would conflict with the position taken by the U.S. in international trade negotiations. Some of the bills endorse the concept that the origin of the animal is determined by certain residency criteria, which directly contradicts the U.S. position in the ongoing WTO negotiations to harmonize International Rules of Origin.

In the end, the proposed legislation would increase costs and lower prices and not achieve its intended objectives. The legislation is flawed because it places emphasis on identifying imported product for those who seek such products; there is no enforcement mechanism; and it does not include all product sold in the U.S. As an example, the legislation excludes meat sold in restaurants. If those who feel the question this legislation seeks to address is one of food safety, or the consumer's right to know, wouldn't they want to identify the country of origin of the meat going into the millions of hamburgers and other meat products eaten daily at U.S. restaurants? The bill fails on each account and the National Pork Producers Council is opposed to its approval.