As required by the 2008 Farm Bill, the Agriculture Department issued final details of the M-COOL (mandatory country of origin labelling) program this week. The new regs become effective the day after the Ides of March, on March 16, 2009. They cover virtually everything you might find in a supermarket that is not both local and in-season: all kinds of red meat, wild and farm-raised seafood, fresh & frozen fruits & vegetables, nuts and even ginseng. Not covered are cooked products or products that have been used in preparing a substantially different food (think chocolate in a cake, for instance). For details http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB?contentidonly=true&contentid=2009/01/0006.xml.
The rules cover labelling at retail, although food-service establishments are specifically exempted, so the corner coffee shop does not have to label its bacon on the menu, for instance — although tablecloth restaurants frequently do anyway for cachet reasons.
What does this mean for the smallcap market? First of all, the companies that supply labeling for fresh/raw or on-the-hoof foodstuffs will probably see a boost, now that virtually all food crossing the borders are covered. That will mean that our biggest food-trading partners will be using a lot more tracking and labelling products: Canada and Mexico being the largest, but also Chile, Brazil, Argentina, New Zealand, Australia, etc. Certain number prefixes are reserved to US-raised products.
Look at Destron-Fearing (http://www.destronfearing.com/about.aspx), the animal ID operation at Digital Angel Corp in South St Paul, MN (Nasdaq:DIGA, http://www.digitalangel.com), and a number of smaller, privately owned companies like Ritchey (http://www.ritcheytags.com/), Ketchum (http://www.ketchummfg.com/), and numerous largely privately owned distributors and resellers.
Look also at projections for larger herds and bigger demand for various kinds of meat originating primarily in the US and Canada (reciprocal food trade between the two surpasses $30 billion annually). There are lots of places to look for such projections, but we like The Cattle Site: http://www.thecattlesite.com/news/25831/cme-growth-in-beef-exports-compared-to-2008. More specialized information is available on The Fish Site (http://www.thefishsite.com) and on The Pig Site (http://www.thepigsite.com). Herd growth is being made possible by lower fuel and feedstock costs (since corn is one of the major feedstocks as well as the primary source of ethanol in the US, the two are connected) — so steaks and pork chops and lamb roasts will be more plentiful and less expensive in 2009. That should affect food retailers of all ilks, restaurants and food-service establishments, as well as truckers and transportation.
Although there have been complaints about the new regs, it seems to be generally agreed that they will provide much-needed information for consumers. They also provide invaluable tracking methods for outbreaks of animal or plant-borne disease.
Bruce Knight, USDA Undersecretary for Marketing and Regulatory programs, said, “The ability to quickly locate an animal’s origin during an animal disease investigation is absolutely essential. The more quickly we can determine the source and extent of an outbreak, the more effectively we can contain it. The use of animal identification numbers with the 840 prefix on U.S.-born animals provides animal health officials with key information about the animal’s origin immediately.”
In a year when vectors that point upward are few and far between, the projected herd growth should provide interesting investment opportunities in a vertical stack of food-0riented companies.