COOL rules may kill contracts

Fergus, Ontario

Weaner exporters to the U.S. may begin losing contracts by early March because of upcoming County of Origin Labeling rules that may come into force in September.

The uncertainty will probably be enough to kill some contracts.

The rising cost of corn doesnt help, noted Steve Illick, Wellington Countys director on the Ontario Pork marketing board. He said U.S. producers may exercise force majeur provisions to cancel contracts over the COOL issue.

There are about 170,000 Canadian hogs per week heading to the U.S., Illick told a district meeting here last month, enough to supply two large-scale double-shifted packing plants.

But U.S. farmers may not want to take a chance buying Canadian-born hogs because packers may discount them if and when they are forced to label pork to indicate the country where they were born, raised and slaughtered.

Various studies, including one by the George Morris Centre at Guelph, have indicated that Canadian hog prices will be discounted by up to $5 per hog if and when COOL becomes mandatory.

There is lots of uncertainty.

Legislators could change the law as they debate the final touches for a new five-year Farm Bill before sending it off to President George Bush to sign into law. But Bush has said he will veto any bill that is too costly, and both the Senate and House of Representatives versions appear to be too costly to suit him.

If theres a veto, it will take longer to pass an acceptable Farm Bill and the September deadline will come and the existing legislationwhich Illick terms dirty, ugly COOLwill come into force.

Yet even then, things will not be clear because the legislation is general and enabling and its the regulations that the U.S. Department of Agriculture will write that will be telling.

Illick said R-CALF, an outspoken protectionist organization for cattlemen, will argue for the most trade-restricting regulations possible. Canadian cattle and hog producers are lobbying politicians to get tough in Washington, telling their politicians, industry lobbyists and public servants that Canada will fight any regulations that amount to non-tariff trade barriers.

There is another, and more welcome, possibilitythat the House of Representatives and Senate will draft a Farm Bill that softens the impact of COOL, and that Bush may sign that bill into law.

And yet another possibility is that the politicians will heed Michael Peterson, a Democrat from Kansas, who chairs the House of Representatives Agriculture Committee and who has been calling for an extension of the deadline to implement mandatory COOL into 2009.

Petersons reasoning is that its taking so long to draft the Farm Bill that the U.S.D.A. officials wont have enough time to do a proper job of drafting regulations before the September deadline.

Illick said U.S. hog producers are keeping a close watch on Canada, ready to pounce with trade action if hog production fails to decline as a result of current, heavy losses. He said the U.S. reasoning is that any sustained Canadian production is only possible because of unfair government subsidies.