NAIS system will hurt industry competition

Stayton Weldon,Agweek

BILLINGS, Mont. — Inherent to every competitive industry is proprietary information. If one competitor gains access to the proprietary information of another, then any competitive advantage associated with that proprietary information is at best lost. At worst, the acquirer of that proprietary information could use it to eliminate competitors. Nowhere in the U.S. economy is proprietary information more important to ensuring competitiveness than in the multi-segmented live cattle industry and beef industry.

The U.S. Department of Agriculture’s National Animal Identification System, however, would grant the four largest meatpackers access to proprietary information held by the thousands of U.S. auction yards and video auctions, as well as cattle feeders. NAIS requires every cattle producer to affix a 15-digit identifier on each animal, which associates each animal to the “premises” of the farmer or rancher who raised the cattle and who sells them to feedlot owners through such markets.

NAIS will reduce, if not eliminate, competition in the U.S. cattle and beef industries by granting meatpackers access to proprietary information now held by those markets and feedlots, via the 15-digit identifier. Here’s how:

There are approximately 757,000 independent beef cattle producers remaining in the U.S. who sell approximately 69 percent of their feeder cattle through auction yards and video auctions to the remaining 87,160 U.S. feedlots that, in turn, sell approximately 88 percent of their fed cattle to just four major meatpackers for slaughter. Business relationships have been built between individual cattle producers and these markets and feedlots and they all compete with other similar businesses to acquire the numbers and type of feeder cattle best suited to their respective marketing and feeding programs.

Over time, these markets and feedlots earn reputations for sourcing, marketing and feeding the specific quality and type of cattle highly coveted by the concentrated meatpackers. Thus, information about the source of the cattle acquired by said markets and feedlots is the proprietary information they use to maintain their competitive edge — and they often pay premiums to, or secure a higher price for, the cattle producers in order to acquire these cattle year after year.

To maintain competitiveness, the feedlots and markets do not disclose to meatpackers the sources of their cattle, as these sources are their proprietary information. NAIS, however, would hand this proprietary information over to meatpackers, enabling them to bypass the auction yard, video auction and feedlots by purchasing the specific quality and type of feeder cattle they want directly from the producer and then placing those cattle in their packer-owned feedlots. This would destroy the competitiveness of independent feedlots and the industry markets.

What makes this possible is the 15-digit NAIS number affixed to every head of cattle that is directly associated with the property of the producer who raised the cattle. The NAIS Business Plan clearly states that distribution records for NAIS eartags are required and also are automatically linked to the cattle owner’s premises identification number. All a meatpacker would have to do is collect the NAIS numbers from cattle they slaughter that are of the quality and type they desire and contact the eartag manufacturer to determine the owner of the “premises” those cattle are linked to. Anyone who thinks the meatpackers are without the means to readily obtain this information is kidding themselves.

In further support of the accessibility of this proprietary information for purposes other than for official disease investigations, the NAIS Business Plan expressly states that these 15-digit NAIS numbers are a convenient means of verifying the origins of cattle for purposes of complying with the new country-of-origin labeling law. Such use, of course, would necessarily require access to this proprietary information upon a claim by a meatpacker or other party for non-compliance with COOL, and access to this information in such instances would be for marketing purposes, not for any disease investigation.

NAIS is but a veiled, governmental marketing program designed to economically disadvantage independent U.S. cattle producers by reducing what little competition remains in the highly concentrated and quickly shrinking U.S. cattle industry.

Editor’s Note: Weldon is a region director for R-CALF United Stockgrowers of America. He is a fourth-generation rancher who raises Hereford cows and Brahman bulls.