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Readiness Pays for Beef Industry

Pre-planned crisis management pays, quick BSE response derails beef demand wreck, beef futures rebound, beef industry breathes sigh of relief

Published on: Apr 25, 2012

Editor's note: USDA Chief Veterinary Officer blogs about the BSE find - check it out.

Within hours, hours after a dairy cow turned up in California with Bovine Spongiform Encephalopathy on April 24, USDA's Chief Veterinary Officer John Clifford was assuring consumers that existing safeguards protected the U.S. food supply.

News that's potentially psychologically detrimental to demand is always bearish on prices. Fed cattle and feeder cattle futures locked limit down.

AVERTING TROUBLE: Readiness by the beef industry, honed since 2003, paid off with latest mad cow find.
AVERTING TROUBLE: Readiness by the beef industry, honed since 2003, paid off with latest mad cow find.

In a statement Clifford stressed that consuming beef products remains safe. "USDA's targeted surveillance system, detected the infected cow," he said. "The cow at no time presented a risk to the food supply or human health."

The beef industry was justifiably nervous about how consumers would react.

The mad cow story was the lead item on the 6 p.m. news. Broadcasters followed with assurances that none of the meat from the infected cow entered the food chain and that U.S. beef is safe.

Consumers have not panicked.

DATA RULES: Hard work, and trade talks, have brought beef exports back above pre-2003 levels.
DATA RULES: Hard work, and trade talks, have brought beef exports back above pre-2003 levels.

It would be a stretch to say consumers are not concerned. However, reassurances from USDA and the beef industry seem to have avoided a BSE-ignited beef demand wreck.

Fed cattle and feeder cattle futures responded by recovering nearly half of their limit down move within 24 hours of the news breaking.

Impact on beef exports is less clear

How Asian markets and Russia respond to this latest outbreak will be critical.

Shortly after the news broke, two South Korean retail chains announced they are suspending U.S. beef sales.

Steve Meyer, Paragon Economics, Adel, Iowa thinks the response will be restrained. The U.S. is recognized by OIE (World Animal Health Organization) as a country with "controlled risk for BSE."

"Our trading partners recognize this and trade on this basis," he says. "This does not mean that some countries may not suspend trade, but most are likely to continue to do business as usual.

"It is possible that the discovery may further delay U.S. negotiations with Japan to increase the age of cattle that qualify for export to that country, raising it from 21 months to 30 months," he adds. "Markets were hoping that this issue would be resolved shortly and this latest case could prove to be a further complication.

Japan's Chief Cabinet Secretary Osamu Fujimura said the new case of mad cow disease in the United States is unlikely to affect Japan's decision on whether to ease its import restrictions on U.S. cattle.

Fujimura, the government's top spokesman, also said Japan believes there is no need to take further steps against U.S. beef imports, as the cow infected with BSE found in California was older than 30 months.

Tokyo banned imports of U.S. and Canadian beef in 2003 following the confirmation of the disease. It lifted the blanket ban in December 2005, but has imposed conditions that included the 20-month-or-younger age limit.

The United States has urged Japan to lift its import restrictions on American beef products.

The U.S. Meat Export Federation, a trade organization whose purpose is to promote beef exports, is saying the atypical BSE case has no impact on food safety and "reaching out to our trade contacts around the world to reassure them that this finding is an indication that the system to safeguard the wholesomeness and safety of US beef is working."