Beef industry rallies together to derail BSE concerns

Apr 27, 2012

Just as the beef markets were seeing recovery from the fallout of lean finely textured beef (LFTB), a case of BSE hit the news, wreaking havoc on midweek markets. But industry groups quickly rallied together to stand behind U.S. beef products, and the markets responded with a quick turnaround.

Last Tuesday, after the BSE rumors alone sent the markets tumbling, USDA confirmed that a dairy cow in central California had tested positive for BSE, the nation’s fourth case. The animal was sent through a renderer after dying on the farm.

While USDA was quick to reassure consumers that it was an “atypical” case of the disease, fears of a potential backlash among consumers and importers of U.S. beef fueled the market sell-off.

Samples conducted from the renderer during routine testing were found to be positive, confirming the first U.S. case of BSE since a cow in Alabama tested positive in 2006.

“The carcass of the animal is being held under state authority at a rendering facility in California and will be destroyed. It was never presented for slaughter for human consumption, so at no time presented a risk to the food supply or human health,” USDA Chief Veterinary Officer John Clifford told reporters.

USDA is conducting an investigation and told reporters that they had begun notifying trading partners as soon as it was confirmed.

They added that this case “should not” impact trade given the current U.S. status under the World Organization for Animal Health (OIE) for BSE.

Mexico, Korea, Japan, Canada and the European Union said they would continue to import U.S. beef.

But last Wednesday morning, two major South Korean retailers pulled U.S. beef from their stores. Reaction in other areas was muted, with Japan saying there’s no reason to restrict imports, but South Korea’s No. 2 and No. 3 supermarket chains, Home Plus and Lotte Mart, said they halted sales of U.S. beef to calm worries among South Koreans.

Home Plus has resumed sales, citing a government announcement of increased inspections, but Lotte kept its suspension in place.

“We stopped sales from today,” said Chung Wonhun, a Lotte Mart spokesman. “Not that there were any quality issues in the meat but because consumers were worried.”

South Korea is the world’s fourth largest importer of U.S. beef, buying 107,000 tons of the meat worth $563 million in 2011.

While markets rebounded Wednesday following the news, some analysts said the final outcome remains to be seen.

In December of 2003, USDA announced the first BSE case in the U.S. and the prices of cattle and beef markets plummeted with a $3 billion drop in exports. It took until 2011 before those exports fully recovered. In 2003, the U.S. set a record, exporting $3.19 billion with 9.6 percent of beef produced in the U.S. exported. In 2004, the U.S. only shipped $631 million, according to USDA data. The other two U.S. BSE incidents had little effect on the markets.

With the BSE case following closely behind the LFTB backlash, the two together have the potential to put a damper on 2012 numbers, but market watchers are optimistic.

“We think the impact of the recent BSE case on U.S. beef exports will be limited. Beef exports in April and May 2006, the two months following the last U.S, BSE case, actually rose 84 percent from the previous year.

At that time, Mexico and Canada were the top export markets and shipments to Asia and Russia were very limited. How Asian markets and Russia respond to this latest outbreak will be critical and we think the response will be restrained,” CME reported.

Concerns of the news threatening negotiations between Japan and the U.S. on age limits are also making the rounds. For the first time since the 2003 BSE case, the U.S. has been in formal conversations with Japan about raising its age restrictions on imports of U.S. beef from 20 months to 30 months.

At the time of USDA’s press conference, USDA did not have an age on the animal and said that would be determined during the investigation process.

“It is possible that the discovery may further delay US negotiations with Japan to lift the age of cattle that qualify for export to that country, rising it from 21 month to 30 month. Markets were hoping that this issue would be resolved shortly and this latest case could prove to be a further complication,” CME reported.

BSE is a rare disease in cattle. According to USDA, there were only 29 worldwide cases of BSE in 2011, a 99 percent reduction since the peak in 1992 of 37,311 cases.

It’s even rarer in humans.

According to the Centers for Disease Control and Prevention, three cases of the variant type of Creutzfeldt-Jakob disease, which is related to BSE, have been found in the U.S. That data was last updated in 2008.

Samples from the infected cow have been sent to laboratories in Canada and Britain for final confirmation, Paris-based OIE said in a statement, adding that the case was unlikely to affect the current USDA “controlled risk” categorization for mad cow disease.

“According to USDA statements, the steps taken so far are consistent with OIE standards,” it added.

Russia’s health watchdog said it could consider restrictions on U.S. imports but that it was waiting for more information on the outbreak and the planned U.S. response before taking a decision.

With most signs pointing towards exports remaining unscathed, U.S. markets and consumers may be the bigger challenge.

An ABC headline read, “Mad Cow Case IDed Through Regular Testing and Random Chance” and opened with, “The discovery of mad cow disease in a dairy cow in California is being described as a combination of the U.S.’s targeted surveillance of its beef supply and random chance.”

And a Reuter’s column headline reads, “Want fries with that Mad Cow Pink Slime Special?” National media was quick to jump on the BSE reporting, but arguably even more powerful, the social network sights were buzzing with the news. Powerful anti-ag activists groups were spreading their anti-beef agenda, using the case as another reason to skip beef.

It appears that the industry has learned a lot this year with the LFTB news. USDA took a somewhat hands-off approach in the beginning of the LFTB fallout, then spent some time walking the fence line, allowing schools to choose their product preference. Ag groups are still asking USDA to take a stronger stance in support of the safe product.

But USDA was relatively quick to come out with reassurance on the BSE case, although the markets still had time to bottom out on rumors alone before they held their press conference. “How this was handled by groups in California appears to have greatly exacerbated the futures market reaction,”said Jim Robb, Livestock Marketing Information Center.

But for every negative from an anti-ag activist, there were several counters from ag supporters and industry associations.

USDA is searching for the offspring of the dairy cow, officials said Wednesday. Clifford, in an audio recording posted on the USDA website, said there is evidence that BSE can be passed from mother to calf.

Clifford said the agency is also searching for, and looking to remove from the market, any cows that were herd mates to the infected cow when it was very young. — Traci Eatherton, WLJ Editor