Global Traceability

1

• Global Traceability Consumer Preferences
• presented by
• Philip M. Seng
• President CEO
• U.S. Meat Export Federation
• ID/INFO EXPO 2002
• July 31, 2002
• Chicago, Illinois

2
History Mission

• USMEF was formally organized in 1976 and is a
  non-profit trade association working to create
  new opportunities for beef, lamb and pork.
• USMEFs mission
• To increase the value and profitability of
  the U.S. beef, pork and lamb industries by
  enhancing demand for their products in targeted
  export markets through a dynamic partnership of
  all stakeholders.

3
USMEF - A True Federation

• A sample of USMEF members in 2002
• National Agriculture Organizations (National
  Cattlemens Beef Association, National Pork
  Board, United Soybean Board, American Farm
  Bureau Federation, American Sheep Industry.)
• Private Industry (Excel, IBP, ConAgra,
  Smithfield, Simplot, Sara Lee, Johnsonville
  John Morrell, P.M. Global Foods.)
• State Agriculture Organizations (Nebraska Beef
  Council, Illinois Pork Producers Association,
  South Dakota Soybean Council, Kansas Grain
  Sorghum Commission, Illinois Corn Board, Indiana
  Farm Bureau.)
• Supply Service Organizations (Elanco Animal
  Health, Pioneer, a Dupont Company, Chicago
  Mercantile Exchange, Illinois Department of
  Agriculture, AgStar Financial Services, Louis
  Dreyfus Corporation.)

4
USMEF Offices Representatives
5
USMEF Global Strategic Priorities

• Total Carcass Utilization
• Trade Support
• Buyer Education Loyalty
• Market Presence
• Industry/Product Image
• Market Access
• Food Safety

6
2001 Beef/BVM Exports

• U.S. exports reached 1,274,000 MT in 2001 an
  increase of 32 from 1996.
• Valued at 3.4 billion in 2001.
• Slight decline in 2001 due to weak world economy,
  strong U.S. dollar, and concerns over food safety
  in major markets.

U.S. Beef BVM Exports 000 MT
U.S. Department of Commerce/Trade Census Bureau
7
Beef/BVM Export Forecasts
1,640K MT in 2005
Growth 2002-05 366K MT (29)
USMEF Estimate
8
U.S. Beef and Pork Exports As Percent Of
Production
USMEF estimate, includes beef and pork variety
meats
9
U.S. Global Beef/Pork Market Share
Volume
USMEF Estimate
USMEF estimate, based on FAO data, includes
variety meats
10
Traceability Demand

• Trade and consumer pressure to show that
  livestock and meat has been produced and
  processed in a safe and hygienic manner.
• The trade and consumers want to be assured that
  judicious use of compounds with responsible
  application have been exercised in the production
  of meat products and that Good Production
  Practices (GPP) and Good Manufacturing Practices
  (GMP) have been applied throughout the production
  and processing of the animal and meat.
• Proof of these practices and procedures can only
  be accomplished through traceability systems.

11
Traceability Programs

• Source Verification
• Branded Programs
• Natural and Organic Programs
• Story Meat

12
Story Meat

• Voluntary
• Marketing Tool
• Shows Producer,Farm and Cattle
• Lets ConsumersKnow SomeoneStands
  BehindProducts

13
Traceability Comparison

• Comparison grid of the different traceability
  systems that are being planned and practiced
  throughout the world.
• The objective of this comparison is to determine
  the level of detail in the various world wide
  programs.
• The comparison grid will provide US producers and
  manufacturers a template and guideline for
  enhancement of current programs and development
  of new programs.
• Provide a clearer direction for US producers and
  manufacturers on application of traceability
  programs and create greater marketing
  opportunities in international and domestic
  markets.

14
Traceability Defined Objectives
C Current Objective P Planned Objective
15
Traceability Government / Legal Requirements
C Current Requirement P Planned Requirement
16
Traceability Tracking Methods
C Current Objective P Planned Objective
17
Traceability Tracking Systems
IA INDIVIDUAL ANIMAL G ANIMAL GROUP OR LOTS 1
Planned Program
18
Emerging Market Access Issues

• As tariffs fall, countries find other ways to
  protect their domestic industries
• Unscientific sanitary standards
• Hormone ban, disease restrictions, zero tolerance
• Technical barriers
• Burdensome paperwork, slow approvals
• Anti-dumping measures
• Traditionally used by developed countries
• Developing countries starting to use

19
As Tariffs FallOther Measures Rise
Average Tariffs and Antidumping
Measures (nontraditional users, 1987-1999)
Source Cato Institute
20
Hormone Bans in 1990
21
Hormone Bans in 2002In Place or Potential
Countries represent 40 of global beef eating
population
22
Consumer Concerns

• Lack of trust of imported product
• Product safety
• Fresh vs. frozen product
• Labeling
• Origin
• Good Production Manufacturing Practices

23
The New Era of Better Informed Consumers

• Consumers, both domestic and international are
  demanding assurances of food safety
• In addition to safety, consumers want to know
  where the product was produced, who produced it
  and is it fresh

Mike John, Missouri cattle producer Tom Martin,
Illinois corn producer promote U.S. beef in Korea
24
What the World Consumer is Asking For

• Freshness is the Most important factor
  consumers take into consideration when they
  purchase meat
• Open ended survey question to over 7,000
  consumers.When making a beef or pork purchase,
  please tell me what is most important to you in
  making your decision?
• In Japan, Freshness was the number two
  priority with Domestic Beef ranking no. 1 with
  24

25
Trust is Key in Japan

• 4 of consumers said they have never trusted
  labels on food
• Sharp drop in consumer confidence in food
  labeling - particularly meat products due to
  false-labeling scandals in the industry
• 78 of Japanese consumers do not trust
  information provided in food labels according to
  a May 2002 Japanese Consumers Cooperative Union
  Survey
• 92 of the 4,326 survey respondents read food
  labels before making a purchase
• 85 believe wording on food labels should become
  standardized for ease of consumer understanding

U.S. red meat promotion in Japan
26
Mislabeling Implications in Japan

• Loss of consumer trust
• Japan will mandate, hype traceability
• Japanese trade will ask U.S. suppliers for
  source-verified product
• What was excessive will be the norm
• Enhanced trend toward branded
• Suppliers must speak directly to consumers
• Will consumers pay extra for truth?

27
Japan Beef Consumer Research

• Women were decision-makers
• Safety was No. 1 beef import issue
• 94 wanted safety information
• 74 would buy imported beef if they knew safety
  standards
• Australia recognized as safe
• Know little about beef nutrition
• TV, newspapers, magazines are most influential
  media

28
Store Brands Becoming the Norm

• Branding will grow because a brand represents a
  promise of quality
• A tremendous amount of marketing and dollars will
  be placed behind a brand
• A brand can build customer loyalty repeat buyers

29
Who Will Consumers Trust?

• A government accredited industry program?
• A government mandated and regulated program?

30
Call USMEF for Advice Assistance

• U.S. Meat Export Federation-Denver, CO
• 303-623-6328
• www.usmef.org

USMEF - 100 staff and consultants ready to
assist you.