November 29, 2004



US Beef Exports Severely Hit by Mad Cow Disease


The $3.4 billion US beef export market has practically collapsed in the year since the first case of mad cow disease was announced in the country.


Colorado's largest agricultural export market suffered losses of more than $272 million.


"We're down hundreds of millions of dollars. Statistically it's tragically black and white," said Tim Larsen, senior international marketing specialist with the Colorado Department of Agriculture.


Beef represents 63 percent of the state's $5 billion agricultural economy -- the state's largest industry, with a huge chunk of the remaining 37 percent dedicated to hay and corn fed to the state's cattle herds, said Jim Miller, director of policy for the state's agriculture department.


"When we're talking about the livestock industry, we're talking cattle. We have some turkeys and broilers and hogs, but we're a beef state, there's no question about it," Miller said. "When the beef industry is hurt, there's a ripple effect."


The collapse of the export market happened virtually overnight after the Dec. 23, 2003, announcement by the US Department of Agriculture that a 6-year-old Holstein dairy cow in Washington state had tested positive for bovine spongiform ecephalopathy (BSE), commonly called mad cow disease. The cow later was found to have been born in Canada and shipped to the United States in 2001. It is thought that the cow was infected with the disease by eating feed contaminated with remains of other infected cows while it was living in Canada.


In the days before Thanksgiving this year, the industry was nervously waiting for word from the USDA on whether another cow had tested positive for the disease. As of Nov. 23, additional tests proved negative for the disease.


Export market collapses


Mad cow disease was identified in Britain in the 1980s and is caused by malformed proteins called prions, researchers say. People can contract a human version of the fatal disease by eating infected meat.


"Literally within 24 hours [of the USDA's December 2003 announcement], virtually all countries that we would be dealing with closed their borders, following international guidelines for a new case. More than 98 percent of our exports were immediately halted," said Lynn Heinze, spokesman for the Denver-based US Meat Export Federation.


Exports make up about 10 percent of the nation's beef market, according to the Centennial-based National Cattlemen's Beef Association (NCBA). The association estimates that the beef industry is worth $175 billion, with cattlemen operating 800,000 farms and ranches.


In 2003, the US exported about $3.4 billion worth of beef and beef products, more than 1.2 million metric tons. Through the first nine months of 2004, exports totaled about $511 million, or 211,000 metric tons, according to the meat export federation.


"Year to date we're down 78 percent," Heinze said.


Colorado's beef exports in 2003 were valued at $435.7 million, said Larsen, with the Colorado agriculture department.


This year, Larsen is forecasting that Colorado's beef exports will drop 63 percent in value to $163 million, with the loss due to countries closing their borders to US beef.


US market strong


The stark losses in the beef export market are in direct opposition to the way the larger US domestic market has been affected by the first case of mad cow disease in the United States.


After a tremendous push by the NCBA industry trade group, consumer confidence in the safety of the US beef supply rose three points, to 91 percent in September 2004 as compared to 88 percent in September 2003, before the USDA's Dec. 23 mad-cow announcement, according to the NCBA.


Domestic demand for beef rose 10 percent in the first quarter of 2004, according to NCBA. And while the retail price for beef dropped after the announcement, prices at the beef counter are still higher in 2004 than they were in 2003.


"It's been a very good year to be in the cattle industry, even with mad cow in the US. The industry is to be complimented for how much they managed to keep the public aware that there was a mad cow, but it didn't get into the food chain," Larsen said.


"That has helped maintain the same level of beef consumption in the US," he said.


Bob Rolston, a cattle buyer for Denver-based Maverick Ranch Natural Meats company and a board member for NCBA, said ranchers were grateful US consumers continued to eat beef.


"We were finally starting to see some profitability, and their [cattlemen's] main concern was after years of lower prices, they were finally starting to pay off their bank notes. If it had gone the other way, it could have bankrupted a lot of people in the industry," Rolston said.


Exporters hurt


But for exporters, the year has been anything but rosy.


As of mid-November, 67 of the 100 countries the United States normally exports beef to had reopened their borders "to some respect," said Heinze, with the export federation.


"But that doesn't represent a large share of the total market. Of our top three markets -- Japan, Mexico and Korea, in that order -- Japan and Korea are still closed and Mexico was closed for a little over three months," Heinze said.


For exporters, the loss of the export market has meant layoffs and shifting their efforts toward the US market.


Border closing hurt Swift


Swift was also hurt when the US closed the border to live Canadian cattle after that country reported its first case of mad cow disease in May 2003. About 5 percent of the 5 million cattle Swift slaughters annually in the United States were imported, Herlihy said.


In response, Swift is trying to add more value to its products for US sale, by adding seasoning or marinade to its meats, as well as slicing or portioning, Herlihy said.


"Those are tasks we had been outsourcing. We'd been selling product to other companies and making a living doing it. Now we're looking at bringing that in house," he said.


Cargill Meat Solutions Inc., based in Wichita, Kan., and formerly called Excel Corp., also laid off people from its Fort Morgan packing plant as a result of the export losses.


And at Denver-based Fuji Foods US Inc., a subsidiary of Fuji Foods Inc. Japan, which sold US beef to Japan in the form of boxed lunches, sales slid from $20 million a year to $10 million, said general manager Aki Kajiya.


"We can't export beef. We still do the pork, but it's dropped about half," he said.


The company has been in Denver since 1990.


Fuji Foods has shifted to making cooked meat products for the US market and has seen some progress, Kajiya said.


But he's pessimistic about returning to the Japanese market, even if that country starts accepting US beef again. Japan and the United States have reached an agreement to reopen the borders, but details still need to be worked out and new shipments aren't likely to start for months.


"It's hard to make money over there," Kajiya said.


Larsen, with the state agriculture department, is also pessimistic about whether the Japanese market will be as strong as it was before the first mad cow case.


When Japan banned US beef, its buyers turned to other suppliers to satisfy their customers' demand, Larsen said.


"They've developed their Australian contacts and they have developed their own markets. US MEF [the meat export federation] indicates it could be two or three years before we're back at the same level of exports," Larsen said.


"It's going to be multiple years before we can recover."

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