"Traceability for Food Marketing Food Safety What 's the"
Agricultural Outlook/January-February 2002 Economic Research Service/USDA 21 Food & Marketing Tofu-quality soybeans are put into con- tainers to preserve their identity. Food suppliers and government have sev- eral motives for documenting the flow of food and food products through produc- tion and distribution channels—and a number of reasons for differentiating types of foods by characteristics and source. In some cases, the benefits of establishing detailed traceability may not warrant the costs. For example, consumers may not be willing to pay for information on specific government-approved pesticides used on each apple in a bin of apples. In other cases, the benefits of IP and trace- ability may exceed the costs. For example, if a large-scale canned fruit manufacturer could profitably produce both a line of Traceability for organic applesauce and conventionally produced apple sauce, the firm would Food Marketing & Food Safety: want to separate organic and conventional- ly produced apples and document the source of each. Traceability systems will What’s the Next Step? vary widely depending on the motivations driving their development and the degree of assurance desired (increasing reliability hen information about a particu- mandated traceability for genetically engi- W lar attribute of a food product is systematically recorded from creation through marketing, traceability for neered crops and foods to help distinguish them from their conventional counter- parts. usually increases costs). Private-Sector Motivations For Traceability that attribute is established. Recording and transmitting information about food prod- Traceability systems are recordkeeping Food suppliers who operate in the private ucts at specific points along the marketing systems. In practice, traceability systems sector have three distinct motives for chain can have a number of practical pur- are used primarily to help keep foods with establishing traceability systems: to differ- poses, including product quality control different attributes separate from one entiate and market foods with subtle or and supply-side management. However, another. There are two primary approach- undetectable quality attributes; to facili- the area where traceability seems to be get- es for separating attributes: tate traceback for food safety and quality; ting the most attention lately—mandatory and to improve supply-side management. tracking of genetically engineered crops • A segregation system separates one crop A firm may establish a traceability system and food—is not among the practical or or batch of food ingredients from others. to achieve any number of these objectives, efficient uses of traceability. Though segregation implies that specific and as a result, the private sector has a crops and products are kept apart, segre- significant capacity for tracing. Information on any number of the attrib- gation systems do not typically entail a utes of a food product can be recorded high level of precision and do not neces- Differentiate and market foods with un- and passed along the food marketing sarily require traceability. In the U.S., detectable or subtle quality attributes. chain. A coffee producer, for example, though white corn is channeled through While the U.S. food market successfully may maintain records on bean variety, the bulk commodity infrastructure, it is mass-produces homogenous commodities location of cultivation, labor conditions on segregated from other types of corn. such as grains and meats, it also offers the farm, whether the bean was grown goods and services tailored to the tastes organically or in the shade, and on the • An identity preservation (IP) system and preferences of narrow segments of the shipping firm. Records such as these identifies the source and/or nature of the consumer population. The growth in might later prove useful to the coffee pro- crop or batch of food ingredients. IP micromarkets reflects an increased ability ducer in tracking quality or in replicating systems are stricter than segregation to satisfy variations in consumer food a top-selling shipment. These records systems and tend to require documenta- preferences as well as rivalry among food could be used to distinguish one type of tion, that is, traceability, to guarantee manufacturers. coffee from another. Recently, the Euro- that certain traits or qualities are main- pean Union (EU) proposed government- tained throughout the food supply chain. 22 Economic Research Service/USDA Agricultural Outlook/January-February 2002 Food & Marketing Food producers differentiate products for whole plant to the production of one spe- Third-party services can be provided by a micromarkets over a wide variety of qual- cific product line. wide variety of entities, including con- ity attributes including taste, texture, sumer groups, producer associations, pri- nutritional content, cultivation techniques, vate third-party entities, and international and origin. Consumers easily detect some Firms that produce foods with process organizations. The following are examples quality innovations—green ketchup is attributes by contracting with ingredient of third parties: hard to miss. However, other differences suppliers for commodities with particular involve credence attributes—characteris- attributes have, de facto, established traceability and IP systems. For example, • The Good Housekeeping Institute, tics that consumers cannot discern even founded for the purpose of consumer after consumption of the product. The firms that market dolphin-safe tuna segre- gate (sometimes exclusively buying education and product evaluation, sets claim that a product contains no geneti- product standards and provides con- cally engineered ingredients asserts a cre- dolphin-safe tuna) and keep records of their transactions. sumer guarantees for a wide range of dence attribute: consumers cannot taste or goods, including foods. otherwise sense a difference between food products containing genetically engi- • The American National Standards Insti- neered ingredients and those made with tute (ANSI), a nonprofit membership non-genetically engineered ingredients. Food suppliers have a strong organization, facilitates development of economic interest in quickly voluntary private-sector standards for a isolating the source of food wide range of products. Credence attributes can be content attrib- utes or process attributes: safety or quality problems. • Underwriters Laboratories (UL), a pri- vate nonprofit entity, provides standards • Content attributes affect the actual and certification, primarily for electrical physical properties of a product, appliances. although they can be difficult for con- Likewise, because no test can now distin- sumers to perceive. For example, con- guish between highly processed oils • The Council of Better Business Bureaus sumers are unable to determine the derived from genetically engineered com- works with the National Advertising amount of isoflavones in a glass of modities and those derived from conven- Review Board to investigate questions soymilk or the amount of calcium in a tional commodities, these products are of truth and accuracy in national com- glass of enriched orange juice by drink- usually differentiated through tracking. mercial advertising. ing the beverages. The incentives to develop segregation or • ISO, a worldwide federation of national IP systems and to document transactions • Process attributes do not affect final standards bodies, promotes the develop- are the same for process and content product content but refer to characteris- ment of standardization and international attributes in cases where testing for con- tics of the production process. These standards for a wide range of products. tent attributes would be costly, inaccurate, reflect consumer concerns about the or difficult. production process, including environ- Governments can also provide voluntary mental stewardship, animal welfare, and Once a firm has produced a product dif- third-party verification services. For labor conditions. Process attributes ferentiated by a credence attribute, it then example, to facilitate marketing, produc- include organic, free-range, dolphin- faces the difficult task of establishing ers may voluntarily abide by government safe, shade-grown, earth-friendly, and market credibility. Consumers are often established and monitored commodity fair trade. In general, neither consumers skeptical about the existence of credence grading systems. nor specialized testing equipment can attributes. In response, a firm can acquire discern process attributes. No test con- credibility like it acquires other inputs— Facilitate traceback for food safety and ducted on the contents of a can of tuna, by making or buying it. Some firms build quality. Many firms use traceability sys- for example, could ascertain that the credibility by establishing a reputation for tems to minimize potential damage from tuna had been caught using dolphin-safe delivering the attributes they advertise. deficiencies in their food safety systems. technologies. Other firms purchase the services of third Food suppliers have a strong economic party entities (neither the buyer nor the interest in quickly isolating the source of The task of producing credence attributes seller) to provide objective validation of food safety or quality problems, before the may prompt some firms to segregate or quality attributes. Third parties offer four food item reaches consumers; all firms establish IP and traceability systems—in primary services to help verify quality want to avoid the association of their fact, where attribute testing is not possi- claims: establish product quality standards brands with safety hazards or compro- ble, IP and traceability may be the only and/or traceability standards; test prod- mised quality. A traceability system can way to differentiate these attributes. Some ucts, and/or review traceability documen- help producers reduce the time required to firms may differentiate production by tation to verify that traceability and/or identify and remove contaminated foods establishing separate product lines within technical standards have been met; pro- from production lines and from the market. the same plant or by sequencing produc- vide certification that standards have been tion and thoroughly cleaning production met; and report violations of standards. Most food producers put coded informa- facilities between differentiated product tion on food packaging to facilitate prod- batches. Other firms may dedicate a Agricultural Outlook/January-February 2002 Economic Research Service/USDA 23 Food & Marketing eage, vaccination records, and other European Union Proposes Mandatory Traceability Standard health data. The advantage of electronic For Genetically Engineered Foods & Feeds tags is that producers and packers can use The European Union’s (EU) proposed regulations for mandatory traceability and transponder readers to track individual labeling of genetically engineered foods and feeds, unveiled in July 2001, could animal characteristics. This allows for take effect by the end of 2003. efficiency gains by sorting individual cat- tle in feed yards, recording precondition- The EU mandatory traceability proposal contains the following requirements. ing and other health regimes, and con- ducting disease surveillance and monitor- • EU handlers of genetically engineered foods or feeds must document from whom ing. Additionally, the resulting chain of they received those items and must retain and transmit information related to documentation enables producers to sell genetic engineering. Handlers would be required to keep records for 5 years. their cattle at a price that reflects quality. • EU farmers must indicate that the commodity was grown using genetic engineer- ing methods and further delineate each type of biotech transformation event that Motives for Government- may be present in each delivery. For imported commodities, this information must Mandated Traceability be provided by the importer. For imported processed products, the importer must A government may have three reasons for indicate which ingredients are genetically engineered. considering making some traceability sys- • Each genetically engineered transformation event must have a specific unique tems mandatory: to facilitate and monitor identifier. traceback to enhance food safety; to • Retail-level foods must be labeled as containing genetically engineered ingredi- address consumer information about food ents on an ingredient-by-ingredient basis. safety and quality; and to protect con- sumers from fraud and producers from A traceability system may add to the costs to growing, handling, storage, transport, unfair competition. processing, and administering the sale of genetically engineered food products. Estimating the magnitude of the costs of identity preserving, tracing, and labeling is Monitor and enhance food safety. To complex and subject to varying assumptions. Some key determinants of the costs help protect the public’s health, the Feder- include the stringency of the tolerance level, the ease of cross-pollination at the al government, along with State and local farm level, and the volume of the product transported, stored, and processed. public health departments, plays an active role in tracing foodborne illness out- breaks. Both USDA and the U.S. Food uct identification. For example, most vol- already proven their value in managing and Drug Administration (FDA) rely ulti- untary recalls listed on the USDA’s Food production flows and tracking retail activ- mately on documentation maintained by Safety and Inspection Service website ity. In the U.S., the vast majority of pack- private firms. refer consumers to coded information on aged food products, as well as a growing products’ packaging. Some firms use number of bulk foods like bagged apples In a traceback investigation, public health detailed coded information. For example, and oranges, bear codes that enable stores officials attempt to identify the source of one milk processor uniquely codes each and manufacturers to collect data on retail a foodborne illness outbreak and then item to identify time of production, line of trade patterns. These codes, known as bar trace the flow of the contaminated food production, place of production, and codes, are composed of a series of num- throughout the food supply system. When sequence. With such specific information, bers detailing standard information on investigation units trace diseases to their the processor can identify faulty product type of product and manufacturer (the origin and contaminated foods are to the minute of production. If a food UPC code), and a series of numbers removed from the food supply, illnesses safety or quality problem were encoun- assigned by the manufacturer to nonstan- can be prevented and lives saved. In the tered, the information could help contain dard production or distribution details. cases of some types of foodborne illness- the costs of damage control. While the original purpose of bar codes es, such as those caused by E. coli was to facilitate tracking of retail sales by 0157:H7, no cure is known; identifying The struggle to control BSE in cattle in item and to generate information on food and removing the source of illness is the the United Kingdom has warranted the consumption trends and patterns, their use only means of preventing the spread of development of various traceability sys- is not restricted to that purpose. The bar disease. The faster the disease-causing tems to document the distribution of beef code technology is also used to manage bacteria can be detected, the faster investi- products. One example is the traceback inventory flow. gators can respond to outbreaks and the system adopted by an Irish supermarket more lives that can be saved. which uses DNA testing capable of trac- Manufacturers have developed other high- ing meat to animal of origin rather than to tech tracing systems for managing input Federal government and other public farm or herd. and output flows. For example, ranchers health officials have taken strides in build- have been using electronic identification ing the infrastructure for tracking the inci- Improve supply-side management. For eartags and corresponding data collection dence and sources of foodborne illness. many firms, traceability systems have cards to track information on animals’ lin- The Foodborne Diseases Active Surveil- 24 Economic Research Service/USDA Agricultural Outlook/January-February 2002 Food & Marketing lance Network (FoodNet) combines active lishment) is used to trace a food product ing new technologies, such as irradiation, surveillance for foodborne diseases with back from plate to farm. The Federal gov- and dispensing with recordkeeping. related epidemiologic studies to help pub- ernment does not monitor private firms’ lic health officials better respond to new traceback ability, and such systems are Process standards such as mandatory and emerging foodborne diseases. Food- not mandatory. Mandatory, government- traceability require that firms adhere to a Net is a collaborative project of the Cen- monitored traceability of private industry common set of production or management ters for Disease Control and Prevention production would be needed only if pri- systems, regardless of the size or techno- (CDC), nine states, USDA, and the FDA. vate firms fail to supply enough traceback logical characteristics of the firm. As a capacity. result, process standards tend to be less Another network, PulseNet, based at efficient than performance standards. CDC, connects public health laboratories Likewise, mandatory government moni- in 26 states, Los Angeles County, New Both USDA and FDA rely ulti- tored traceability is likely to be a less effi- York City, the FDA, and USDA to a sys- mately on documentation cient mechanism for building food safety tem of standardized testing and informa- maintained by private firms than enforcement of food safety perform- tion sharing. PulseNet helps reduce the to trace the flow of inputs ance standards. time it takes disease investigators to find into the final food product. and respond to foodborne outbreaks. Address consumer knowledge about food safety and quality. Where markets Both Foodnet and Pulsenet differ from Private firms provide the optimal amount produce all the information that con- passive surveillance systems that rely on of traceback capability if markets function sumers are willing to pay for, mandatory reporting of foodborne diseases by clini- properly. If all benefits as well as the traceability systems would be superfluous cal laboratories to state health depart- costs of traceability are borne by private and introduce unwarranted costs. Howev- ments, which in turn report to CDC. firms, then the market supply of traceback er, sometimes consumers would like more Under passive information gathering, only will be optimal: the net benefits of trace- information about the safety and quality a fraction of foodborne illnesses are rou- ability systems for food safety will be standards maintained by food manufactur- tinely reported to CDC. maximized. However, when markets fail, ers. It is possible that mandatory, publi- as when the benefits firms actually reap cized traceability systems could help Once investigators have identified a con- are not equal to social benefits, the reduce such asymmetry by providing taminated food source, the Federal gov- amount of traceback capacity may not be additional safety and quality information ernment works with food manufacturers optimal. Where the market fails to give so that consumers could more readily to isolate the cause of contamination and food suppliers incentives to maintain choose food products to match their pref- to remove the contaminated food from the traceback or other food safety systems, erences. For example, various government market. Two Federal agencies may take and consumers are willing to pay for agencies mandate that oyster producers action: USDA and FDA. USDA, which more safety, there could be a need for document the time and place of oyster regulates the safety of meat and poultry, intervention to increase traceability. harvest. However, a general mandatory does not have authority to require that traceability system may not be the most manufacturers recall contaminated foods; efficient way to enhance food safety— But, even assuming that the operations of recalls handled by USDA are voluntary— enforcement of food safety performance the marketplace do not provide sufficient although USDA can detain or seize adul- standards is generally a better option. food safety, is a government-mandated terated or misbranded products. USDA traceability system the best or least-cost may also remove inspectors from federal- solution? Usually, performance stan- Protect consumers from fraud and pro- ly inspected plants that are recalcitrant dards—rather than process standards— ducers from unfair competition. To pro- about addressing safety problems, effec- ensure the most efficient compliance sys- tect consumers from fraud, and producers tively halting plant operations. Recalls tems. With performance safety standards, from unfair competition, the government handled by FDA, which regulates all such as standards for pathogen contami- may require that firms producing foods domestic and imported food except meat nation or recall speed, the individual firm with credence attributes substantiate their and poultry, are conducted voluntarily, can choose the most efficient process to claims through traceability systems. If sometimes by FDA request. achieve a particular standard. For some firms are not required to establish proof firms, plant closure and total product that credence attributes exist, some may Both USDA and FDA rely ultimately on recall may be the most efficient method try to pass off standard products as those documentation maintained by private for isolating production problems and having credence attributes, in order to firms to trace the flow of inputs into the removing contaminated food from the gain price premiums. In these cases, the final food product and to track the distri- market. For other firms, detailed trace- government may require that firms pro- bution of final food products throughout back, allowing the firm to pinpoint the ducing valuable credence attributes verify the retail sector. A firm’s traceback docu- production problem and minimize the their claims. For example, the government mentation is constructed from its trace- extent of recall may be the most efficient may require that firms producing organic ability system: the documentation used to solution. Other firms may be able to foods verify the claim. No such verifica- trace a food from farm (or point of pro- maintain safety at less expense by adopt- tion would be necessary, of course, for duction) to plate (or retail or eating estab- conventional foods because consumers Agricultural Outlook/January-February 2002 Economic Research Service/USDA 25 Food & Marketing typically are not willing to pay more for performance standard would enhance February Releases—National these foods. firms’ incentive to maintain efficient food Agricultural Statistics Service safety systems. Similar but Distinct Concerns The following reports are issued electronically at 3 p.m. (ET) unless For Private, Public Sectors When there are process attributes that are otherwise indicated. valued by consumers—like non-genetical- In the private sector, the goals for trace- www.ers.usda.gov/nass/pubs/ ly engineered foods—then food suppliers pubs.htm ability of food supplies are mainly to may have the incentive to market those assure buyers of the existence of quality attributes. Consumer surveys have indicat- February attributes, to facilitate traceback for food ed that many EU consumers are opposed 1 Dairy Products Prices safety and quality, and to improve supply to the purchase of genetically engineered (8:30 a.m.) chain management. foods. Manufacturers and retailers can opt Milkfat Prices (8:30 a.m.) to market non-genetically engineered Cattle The main goal of the public sector for foods. Consumers’ choice of products Poultry Slaughter traceability is to ensure that recordkeep- would then be enhanced without imposing Sheep and Goats ing is sufficient for traceback, with the government-mandated traceability. Many 4 Dairy Products objective of mitigating foodborne public retailers and food establishments are 5 Weather - Crop Summary doing this—both in the U. S. and in (noon) health problems. Additionally, when mar- Egg Products kets fail, the public sector may have an Europe. 6 Broiler Hatchery interest in providing consumers with 7 Catfish Production access to information about safety or Mandatory traceability for all foods is 8 Cotton Ginnings (8:30 a.m.) quality standards maintained by private also unlikely to be the most efficient Crop Production (8:30 a.m.) firms, and in protecting consumers and mechanism for verifying quality claims Dairy Products Prices producers from fraudulent claims. for the subset of foods with credence (8:30 a.m.) quality attributes valued by some con- 12 Weather - Crop Summary sumers, such as non-biotech foods. A gov- (noon) Proponents of the EU proposal for 13 Broiler Hatchery mandatory traceability of genetically ernment may indeed have an incentive to Crop Values engineered food and feed argue that such require that producers of non-genetically Turkey Hatchery a system is necessary engineered foods verify that these foods 14 Potato Stocks are actually not genetically engineered, if 15 Dairy Products Prices • to ensure the government’s ability to the non-genetically engineered attribute is (8:30 a.m.) recall genetically engineered products in of value to some consumers. However, no Milkfat Prices (8:30 a.m.) case of unforeseen food safety or envi- such verification would be necessary for Cattle on Feed the genetically engineered foods currently Farm Labor ronmental problems; Milk Production on the market, because this attribute is not • to enhance consumer choice; and of value to consumers (most biotech prod- 20 Weather - Crop Summary (noon) ucts currently on the market boast produc- Broiler Hatchery • to control and verify labeling claims. er, not consumer attributes). 21 U.S. and Canadian Cattle However, it is doubtful that mandatory (noon) traceability will prove to be the most effi- A mandatory traceability system for both Cold Storage genetically engineered and non-genetical- Cold Storage - Ann. cient mechanism for achieving any of ly engineered foods is unnecessary to pro- 22 Dairy Products Prices these objectives. (8:30 a.m.) tect consumers from fraud. Such a system could raise costs without generating com- Catfish Processing Performance standards, which allow firms Chickens and Eggs pensating benefits. AO Farms and Land in Farms to determine the most efficient mecha- nism for compliance, are usually more Elise Golan (202) 694-5452 Livestock Slaughter efficient than process standards for ensur- firstname.lastname@example.org Monthly Hogs and Pigs ing food safety or environmental quality. Monthly Agnews Barry Krissoff (202) 694-5250 26 Weather - Crop Summary With government-mandated food safety email@example.com (noon) performance standards, all food, including Fred Kuchler (202) 694-5468 27 Broiler Hatchery genetically engineered food, that did not firstname.lastname@example.org 28 Agricultural Prices meet the standards could be subject to Honey recall and/or seizure. A strictly enforced Peanut Stocks and Processing Trout Production