Cabinet will decide the fate of the National Animal Identification and Tracing (Nait) scheme in the new year after reviewing the final business case.
The scheme would mean all cattle and deer would be tagged with radio-frequency identification (RFID) chips by the middle of 2011.
Their movements would be recorded in a database that could help track animals during outbreaks of disease and tell consumers where meat had come from. Sheep may eventually be tagged.
Nait's governance group has opted to use "tried and true" but less-advanced low-frequency RFID technology to tag cattle, rather than ultra-high frequency (UHF) technology which allows tags to be read from a greater distance and multiple tags to be read at one time. It will consider alternative technologies, once they have been proven and accepted.
Grant Pugh, deputy chairman of RFID Pathfinder Group — which has lobbied for the use of UHF technology — says it supports the traceability scheme, but Nait's low-frequency approach is "a little outdated". Moving to another technology at a later stage would mean processing plants and saleyards would have to invest in dual infrastructure, such as tag readers.
Unlike low-frequency technology, UHF is attracting a lot of investment overseas, and Denmark and Canada are looking to use it to tag and trace livestock.
"We believe with the level of investment going into it, UHF technology is likely to be more cost-effective than low-frequency, especially for fast-moving animals like deer and sheep," he says.
The technology has been proven to work in other industries, including in freight and logistics, and Nait should offer incentives to New Zealand firms to develop it.
Andrew Cooke, managing director of agriculture IT firm Rezare Systems, says it has done trials of UHF with deer, sheep and cattle and found the technology is "at least as good" as low-frequency.
UHF does not work in chips embedded in animals and its signals cannot be read through body tissue — meaning antennas must be placed above groups of animals.
But the technology is less sensitive to electrical "noise" from computers and motors and can hold a lot more data — for example, allowing farmers to store animal treatment information in tags.
Nait chose low-frequency technology a few years ago when it was believed the scheme would be mandatory by next year, but the first commercially available UHF tags have now appeared in Asia.
"At that time, it really was the only logical choice. But I still do question a little bit if it is the right decision long term."
UHF is cheaper than low-frequency, but the costs of making millions of chips with the newer technology and distributing them throughout New Zealand mean tag costs for both will probably be similar, he says. Low-frequency tags cost between $2.40 and $2.80.
Federated Farmers dairy chairman Lachlan McKenzie says farmers using low-frequency technology will waste time and money having to get "up close and personal" with stock to read their tags and the technology is no better than conventional barcode systems.
"With UHF, I could scan all 600 cows in my yard at once. It's a whole lot more practical."
UHF has been proven to work at United States department store giant WalMart.
Federated Farmers has opposed the Nait scheme, expressing concern that the benefits may not outweigh its costs and that information could be used by the Government for the emissions profiling of farms under the emissions trading scheme.
Electronic tagging should be voluntary and commercially driven, McKenzie says.
Nait chairman Ian Corney says it has opted for a technology that is guaranteed to work. UHF can be sensitive to noise in processing plants and not all farmers want to record extra data to tags.
Processing plants and saleyards would not necessarily have to invest in dual infrastructure if another technology was adopted.
"My information is that there are readers that can read both technologies. Everyone else has an axe to grind in terms of the technology but we've always been quite dispassionate about that. We're not in this for anything else other than to make a traceability system work."
Meanwhile, the Agriculture and Forestry Ministry has been given the go-ahead to build a database that will provide Nait with up-to-date information on rural properties. The FarmsOnLine system will cost about $3m to build, and $9m to operate over five years.