KAY’S korner

Dec 2, 2011
Food safety costs billions

Food safety is the beef industry’s second most critical issue after demand. In fact, the two are inter-connected. So no one will quibble with the need to spend whatever it takes to make beef as safe as possible. But an examination of the years after the Jack-in- Box E. coli O157:H7 tragedy in 1993 shows that the deadly pathogen has cost the industry billions of dollars.

I watched the industry in the decade after the tragedy spend hundreds of millions of dollars and in early 2003 conducted a study of the total cost. The resulting numbers were staggering. I calculated that the tragedy cost the industry as much as $2.8 billion in the decade. By far the biggest cost, $1.6 billion, was the decline in demand caused by negative publicity about beef. The second major cost was that incurred by packers. This included at least $400 million in food safety interventions and another $350 million in increased operating costs.

Shortly after the tragedy’s 10th anniversary came the U.S.’ first BSE case, which caused billions of dollars in damage in terms of lost export sales. Packers since then have spent tens of millions of dollars in separating and disposing of SRMs (specified risk materials)

from carcasses. Meanwhile, they and the rest of the industry have continued to spend heavily on E. coli-related initiatives.

The industry has made huge strides since 1993 in reducing the prevalence of E. coli but the costs associated with this pathogen are far from over. USDA in September announced it will start testing next March for the presence of six additional strains of E. coli (known as non-O157 STECS). While USDA puts the costs of this testing at $10 million annually, I and others believe this cost will be tiny compared to the costs associated with the consequence of testing.

The consequence is that the new testing will likely result in far more positives than now occur for O157. Confirmed positives for O157 and the STECs will be five to 10 times higher than currently for O157 alone, says scientist Mohammed Koohmaraie, a world authority on E. coli. This means that a lot more beef trimmings will have to be diverted to cooking, he says.

About 0.8 percent of all trimmings currently held and tested for O157 go to cooking. The increase will leave less available raw material on the market and so its value will increase. Conversely, testing for the STECS will also mean a longer holding period than for product tested for O157.

So even if product tests negative, it will have a shorter shelf life and will likely sell at a discount to other product.

This prospect comes as the price of fresh 50CL trim (from steers and heifers) reached new record highs in early November, making 50CL prices 67 percent higher than at the same time last year. The price of other trimmings is likely to increase as well after USDA and packers start testing for the STECs, as testing will involve all trimmings from fed and non-fed cattle. This scenario will play out just as commercial cattle slaughter begins to shrink. Early forecasts are for total slaughter in 2012 to decline 4.5 percent or 1.5 million head.

Testing for the STECS will produce more positives for two reasons, says Koohmaraie. The testing will not have the same degree of efficacy as with O157. Second, the STECS don’t yet have the specificity that O157 has. They are detected as a group of organisms, as opposed to one type of organism like O157, and they lack unique characteristics. So the first screening will find a large number of samples to be “potential positives,” he says.

He estimates a 4 percent to 10 percent positive range in trim and says variation will occur due to the effectiveness of dressing proce dures and interventions in plants. Regardless of how good a plant is, the number of potential positives will be substantially higher than for O157, he says.

The list of STECS will grow to include other non- O157 STECs, says Kooh maraie, CEO of the meat division of IEH Laboratories and Consulting Group, Lake Forest Park, WA. So the industry one day will be dealing with more than the big 6. There will be a renewed impetus to do the right things on dressing practices, intervention efficacy, and harvest processes in general. This will eventually result in a drop in the number of potential and confirmed positives for O157 and the six additional STEC strains, he says.

In the short-term, however, buyers of beef trimmings will likely face higher prices. This might increase the price of hamburger patties in fast food chains and ground beef in grocery stores. The beef industry’s most valuable product might be slightly safer as a result of the additional testing. But it will come at a cost to the industry and possibly to consumers. — Steve Kay (Steve Kay is Editor/Publisher of Cattle Buyers Weekly, an industry newsletter published at P.O. Box 2533, Petaluma, CA, 94953; 707/765-1725. Kay’s Korner appears exclusively in WLJ.)