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Possible Producer Benefits from a National Animal Identification
System (NAIS)
Prepared by:
Dr. Ruby WardAssistant Professor
Extension Economist
Economics Department
Utah State University
Email: [email protected]
Western Center for Risk Management Education
Western Extension Marketing Committee
Food Safety & Bioterrorism
• BSE in Canada and United States– Highlighted the need for an animal tracking
system
• Increased threat of Bioterrorism
• Highlighted need for NAIS– Trace back of infected animals within 48 hours
of detection.
• How does this benefit producers?
Food Safety & Bioterrorism
• Trace infected animal within 48 hours
• Quick isolation
• Increased consumer confidence
Exports and Prices
• Exports are 8-10% of beef production in the U.S.
• Drop in exports has a larger drop in price• Price elasticity is -.62 (Huang 1996)
– This measures the percentage change in quantity for a 1% change in price
• Price Flexibility of 1.5 – 1.6– Inverse of price elasticity measure the
sensitivity of price to changes in quantity.
Exports and Prices
• Exports are 8-10% of beef production in the U.S.
• Price Flexibility of 1.5 – 1.6– Inverse of price elasticity measure the
sensitivity of price to changes in quantity.
• Drop of 9% in demand would cause price to drop by 15% (1.6*9%)
• Similar to what happened in market after BSE announcement in December 2003
Food Safety and Bioterrorism
• Lower wholesale and retail prices for beef will be passed on to the cattle producer.
• Program that supports demand in event of food safety or bioterrorism crisis
• Will help producers
Increased Production Information
• More information flowing along marketing channel
• Marketing Channel – Stages a product passes through
Cow/calf producer Feedlot
PackerRetailer
Commodity Vs. Differentiated
• Commodity– All products seem the same– Low price is important
• Differentiated Products– Some products can be perceived as higher
quality– Usually sell for a higher price
• If more information is attached, the product may be able to sell it for more
For Example
• Selling a 500-pound calf– Commodity sells for market rate
• If higher probability this calf will perform well– Would finish faster– Grade higher than other calves
• Then calf is more valuable and could get a premium price.
Higher quality herd
• Information about carcass yield, feedlot performance etc. could be linked to a particular animal
• That information could flow back to the producer (usually a fee is attached)
• Producer could use it to selectively cull the herd
• Herd quality and performance could increase
Pricing on a Grid
• Only a portion of animals currently being priced based upon performance
• Should increase in future
• Some feedlots may require information as a market entrance requirement
• Animal ID could be key to market access
Verifying Information
• Some product characteristics require third party verification
• NAIS can facilitate by being able to track and audit the animal through the system.
Producer Benefits of Information
• More information can flow along marketing channel
• Can Differentiate products
• Can use information to improve herd quality
• Easier to do audits