AMS Update to the ASI Executive Board

Dr. Craig A. MorrisDeputy Administrator

AMS Livestock, Poultry and Seed Program

AMS Market News• AMS normally issues hundreds of market reports every day.• During the shutdown, no mandatory or voluntary Market News

reports were issued… USDA stakeholders took notice!• After the shutdown, AMS hit the ground running to capture the

most critical missing data—most notably mandatory and movement data.

• Market News was able to aggregate and publish Livestock Mandatory Reporting (LMR) data for cattle, swine, lambs, beef, pork, lamb, and dairy submitted to AMS during the shutdown.

• AMS also recaptured and published import movement and livestock production data.

• By October 24, 2013, Market News had published the full set of mandatory market information, crossings and imports, and voluntary domestic shipment data.

Livestock Market Information Center (LMIC) Update

• What is the appropriate volume threshold for reporting imported lamb cuts?

• What variation of the current LMR confidentiality guideline will assure continued reporting, at least on a weekly basis?

• What system of pelt reporting will assure reporting of pelt prices?

• Are the categories and reports reported under LMR for lamb currently appropriate for the future given the current industry structure?

Livestock Market Information Center (LMIC) Update

• LMIC presented recommendations for changes and improvements to LMR lamb reporting to the ASI during 2013 annual meeting.

• USDA Market News and ASI staffs have collaborated on potential solutions.

• Several recommendations already been implemented by USDA.– Simple report content or format changes, etc.

• Other recommendations will require regulatory changes or significant enhancements to LMR– These were presented to the ASI leadership

committees for approval.

LMIC Report: Proposed Changes

• Lower reporting threshold for lamb plants from an average annual slaughter rate of 75,000 head of lambs to 35,000 head for the preceding 5 calendar years.

• Lower reporting threshold for lamb importers from an average annual import volume of 2,500 MT of lamb meat for the preceding 5 years to an average of 1,000 MT for the preceding 4 years.

• Amend definition of “packer owned” for lamb reporting to mean lambs that a packer owns for at least 28 days immediately before slaughter. – Currently, “packer owned” is defined for all livestock species as a

packer owned for at least 14 days immediately before slaughter.

LMIC Report: Proposed Changes• Add definition for “lambs committed” to capture lambs

intended for packer delivery beginning on the date of an agreement to sell the lambs.

• Amend the regulation to add lamb pelts as a reportable commodity under the LMR regulation.

• Eliminate Yield Grade Code options for YG 1-2, YG 2-3, YG 3-4, and YG 4-5 from the LMR reporting requirements, so that packers could only report the number of carcasses sold by each specific yield grade category.

• Eliminate option for reporting estimated carcass weight range for each lot and replace with specific 10-pound incremental carcass weight range. – For example, Estimated Carcass Weight Range: 45 lbs/down, 45-55 lbs,

55-65 lbs, 65-75 lbs, 65-85 lbs, and 85 lbs/up.

LMIC Report: Proposed Administrative Reporting Changes Requiring Enhancements

to the LMR System• AMS should eliminate unnecessary product items and/or

grouping similar items into more general product categories as appropriate to allow more imported lamb cuts to meet the LMR confidentiality guideline and be reported more consistently.

• AMS should discontinue the reporting of Negotiated Sales of 0-21 Days Fresh/Frozen and Negotiated Sales of 22 Days and Up Fresh/Frozen as separate categories to enable additional product reports.

• AMS should update lamb pelt classifications and descriptors to better reflect current industry marketing practices.

LMIC Report: Recommendations Already Addressed by AMS

• Updated and reviewed the calculations used to determine the Estimated National Lamb Carcass Cutout report, including the net carcass value costs, every 2 years in an effort to keep this series current with industry conditions. – January 3, 2014: AMS collected yield and processing

cost information from all of the lamb packers, and updated product yields in the Estimated Lamb Cutout.

• January 2013: AMS discontinued publishing 3 regional lamb reports. – It became impossible to report information on a

regional basis due to consolidation in the industry.

LMIC Report: Recommendations Already Addressed by AMS

• May 2013: AMS changed the National Daily Lamb Report for negotiated and formula purchases to a weekly report.

• May 2013: AMS changed the heavy carcass weight category from 85 lbs/up to 85-95 lbs and 95 lbs/up on a few reports to better reflect price differences in heavier weight categories.

• March 2013: AMS removed unused purchase type categories from several reports to eliminate confusion for users of reports.

American Lamb Board (ALB) Assessment Rate Increase

• May 14, 2013: USDA published the final rule to raise the ALB assessment rate, effective June 13, 2013.

• The rate, which applies to all live ovine animals sold.• Increased from $0.005 to $0.007 per pound for

producers, feeders, and seedstock producers, and from $0.30 to $0.42 per head for first handlers.

• Increase was essential to: – Maintain, enhance, and expand efforts to build demand,

increase awareness.– Create preference for American lamb through targeted

advertising, retail promotions, public relations campaigns and media outreach, foodservice programs, consumer events, social marketing, and nutrition education.

Since the New ALB Assessment Rate Took Effect…

• The Board’s revenue has increased by $339,055 compared to the same time period the previous year (an increase of approximately 26%). – This is less than the anticipated 40 percent

increase in assessments, due to a lower number of lamb slaughters in 2013.

• USDA has not received any complaints regarding the increase.

Industry Roadmap Study (Conducted by the Hale Group)

• ALB selected The Hale Group to: – Analyze and identify the major

challenges– Propose effective solutions– Develop a strategy to strengthen

industry’s short-term and long-term competitive advantage.

Ultimate Goal of Industry Roadmap: Return the Industry to Consistent Profitability

• Conduct an initial industry SWOT analysis.• Assess the American lamb industry’s

competition.• Analyze the lamb industry’s internal

challenges.• Prioritize the lamb industry’s challenges.• Evaluate alternative solutions to the industry

problems.• Develop an industry-wide roadmap to

strengthen the lamb industry.

Lamb Industry Roadmap Completed in December 2013

• Improve the quality and consistency of American lamb;

• Increase demand for American lamb; • Improve industry productivity to remain

competitive;• Improve industry collaboration – work

together as a whole industry.

Board Diversity• The diversity of nominees continues to be a very

important consideration in Board appointments. • Boards should reflect that diversity in the size of

operations, experience of members, methods of production and distribution, marketing strategies, etc.

• USDA is committed to increasing the number of women, minorities, and persons with disabilities on the various boards.

• We expect the Board and its nominating organizations to continue their outreach to underrepresented groups that serve the industry.

National Sheep Industry Improvement Center

• Grants are awarded for: – Research on new technologies. – Knowledge that will improve the efficiency,

profitability, and quality of the sheep or goat industry.

– Provide seed money for the production and commercialization of new and innovative processes.

• Grants are evaluated against a Strategic Plan developed by the Board and approved by USDA.

National Sheep Industry Improvement Center

• July 1, 2013: Sheep Center began accepting applications for 2014 funding opportunities.

• The Sheep Center Board of Directors approved funding at $217,222. – Leaves $109,603 remaining of the

original $1 million in appropriated funds.

Sheep Center Grants:

• AMS approved 8 out of 10 projects and funding in their entirety.

• The Sheep Center is gathering additional information from the remaining recipients before the other 2 projects are submitted to AMS for approval.

Future of the Sheep Center• Current Senate language:

– Moves the program under Agricultural Marketing Act of 1946.– Directs AMS to establish a competitive grant program to

strengthen and enhance the production and marketing of sheep and sheep products.

– Grants are to improve infrastructure, business, resource development, and innovative approaches to solve long-term needs.

– Secretary shall make grants to 1 or more national entities. Provides $1.5M in CCC funds available until expended.

– Increased limitation on administrative expenses from 3% to 10%.

• AMS consulting with OGC on whether to amend current rules or develop a new rule if the language remains the same.

Lamb Instrument Grading• ASI requested USDA develop performance standards for

instrument prediction of factors and/or grades for lamb carcasses.

• Worked with ASI representatives, Colorado State University and others to develop an instrument method that predicts sub-primal meat yields, quality and yield grade.

• Two instrument performance standards approved in 2012: – USDA Lamb Cutability Instrument Performance Standards – USDA Lamb Quality Grade Instrument Performance

Standards • March 2012: One lamb grading instrument tentatively

approved. Final approval contingent upon grade line alignment to ensure a seamless transition to instrument grading.

Instrument Grading Pilot• Month long project conducted in a cooperative effort

between Mountain States Rosen, JBS Swift & Co Lamb, Colorado State University and USDA

• Seamlessly aligned USDA grade lines and provided the data for a white paper to assess the benefits, effectiveness and return on investment.

• Collected instrument image data from over 33,800 lambs.

• After analyzing the data to ensure that any adjustments and conclusions valid, the robust instrument grading process indicates that the process, once implemented, will be suitable for official use.

Benefits of Instrument Grading

• Will allow for an audit and performance-based protocol to be phased in over time.

• Offers potential grading cost savings to customers while increasing lamb throughput and improvement to grade uniformity between plants.

• Will reduce work-related musculoskeletal disorders often associated with USDA lamb grading.

Lamb Tenderness Standard

• USDA and ASI collaborating to develop a lamb tenderness standard based on physical measure of tenderness (Warner-Bratzler shear force).

• ASI has proposed to use the same tenderness thresholds for “Tender” and “Very Tender” currently being used by the beef industry.

• USDA has protocols in place to implement a certified tenderness program for the lamb industry.

Lamb Maturity Definition and Compliance

• 1996: ASI worked with Congressional representatives on the Farm Bill to amend the Federal Meat Inspection Act with regards to lamb labeling and enforcement.

• Primary goal: to provide consistency and a level playing field between domestic and imported lamb.

• American feeders and packers became concerned over the potential impact of 7 to 8 percent of their “old crop” market animals in the spring being labeled and sold at mutton prices.

• Concerns continue that lamb from ungraded mature carcasses (yearling mutton) has a detrimental impact on consumer acceptance.

U.S. Standard Definitions

• U.S. Standards for Grades of Slaughter Lambs, Yearling, and Sheep: – Immature ovine, usually under 14 months of age, that

has not cut its first pair of permanent incisor teeth.

• U.S. Standards for Grades of Lamb, Yearling, and Mutton Carcasses: – A carcass with perfect break joints on both trotters or

perfect break joint (no more than slightly red but slightly dry and hard) on one trotter and other indications of lamb, which are no more than slightly wide and moderately flat rib bones, light red color of inside flank muscles, and fine texture of lean.

U.S. Standard Definitions

• Lambs are broken into a younger and older group depending on the lean color and bone ossification. This describes the maximum allowed in the older group.

• Spring lamb or genuine spring lamb are trade terms and should be applied under FSIS truth and labeling aspects of the Meat Inspection Act.

January 2013 ASI Meeting Directive

• Develop a more accurate definition of maturity for yearling mutton in the U.S. Standards for Grades of Lamb, Yearling, and Mutton Carcasses

• Find a more industry-agreeable term for “yearling mutton”.

Benefits of Draft Standard

• Incorporates flavor descriptors when dentition is used as a maturity indicator: – “Lamb or Mild Lamb Flavor” – “Yearling Lamb and/or Moderate Lamb Flavor” – “Mutton and/or Robust Lamb Flavor”

• When used in concert with “USDA Certified Tender” or “USDA Certified Very Tender” allows the lamb industry to communicate lamb quality attributes to consumers in understandable terms in plain language. – Effectively focuses communication on lamb quality.

Section 32 Lamb Purchases• June 27, 2013: USDA approved the purchase of up

to $5 million of lamb products for surplus removal. – Reduce inventory levels– Bolster prices paid to producers– Stabilize the industry's financial position– Assist producers in facing competition from imports– Provide an opportunity to familiarize potential new

customers with lamb products. • By the end of FY2013, AMS purchased 1,080,000

lbs. of lamb valued at approximately $4,960,064. • Thus far in 2014, AMS has not purchased any lamb

or lamb products.

COOL Compliance

• May 23, 2013: COOL final rule was amended for meat labeling provisions requiring retailers to provide the animal production step information (born, raised, harvested) for meat covered commodities.

• Amendment no longer allows commingling of origins for meat muscle cuts.

• USDA provided a 6-month period for education and outreach activities for affected industry stakeholders.

COOL Compliance

• Utilized existing cooperative agreements with agencies in all 50 states for retail surveillance activities.

• Approximately $1,245,600 was allocated to the states to complete 2,061 retail store reviews.

• Roughly 350 state officials reviewed 703,671 covered commodities in retail stores and cited 21,534 COOL non-compliances during 2013.

COOL Compliance• COOL auditors conducted supplier desk audits for 152

covered commodities from records gathered from retailers in 2012.

• 44 meat items audited:– 21 beef– 9 pork– 4 lamb and goat– 10 chicken

• 9 findings of supplier non-compliance in 2013:– 1 fruit supplier– 2 vegetable suppliers– 2 pecan suppliers– 4 fish/shellfish suppliers

The Economic Landscape• Published monthly

by LPS Agricultural Analytics Division.

• Distributed to interested parties upon request.

• Contact: Mike Sheats (michael.sheats@ams.usda.gov).

Thank You and Questions?

Dr. Craig MorrisDeputy Administrator

AMS Livestock, Poultry and Seed Program202-720-5705

craig.morris@ams.usda.gov