Beef Market Advisor

Friday, July 01, 2005

COW/CALF CORNER
The newsletter
July 1, 2005


In this Issue

Derrell S. Peel, OSU Extension Livestock Marketing Specialist


Life After BSE


Cattle markets breathed a sigh of relief this week after the confirmation of BSE last Friday caused no significant market reaction. Overall, fed cattle futures are down roughly $1.75/cwt. compared to levels prior to June 10, when the positive test was first reported. Moreover, it is not necessarily appropriate to attribute all of the decline to the BSE case as fed cattle markets were already in retreat at that point. Nevertheless, by any measure, the second U.S. BSE case resulted in a very muted market reaction.

Nor should this case materially affect on-going trade issues with respect to cattle and beef. The U.S. position in trade talks has been based on a minimal risk assessment that assumes the likelihood of a small number of cases of BSE in the U.S. This was done despite the attempts by some to base U.S. trade negotiations on the U.S. as BSE-free, which would have permitted a distinction between the U.S. and Canada. As a result, the new case changes nothing about the U.S. status or position (as acknowledged by the Japanese) and, despite the frustrating slow progress to date, should not affect on-going actions to reestablish trade with Japan. Canada and Mexico likewise have indicated that this new case does not change U.S. status in those markets. Taiwan did re-impose their ban on U.S. beef but this represents a very small quantity of beef and will likely be temporary. Resolution of the border issues with Canada may actually be facilitated now since there can be no logical argument of any appreciable difference in the U.S. and Canadian situation.

Although this is the second case of BSE in the U.S., it seems that many in the cattle industry were dreading this case more than the first one because it was the first in a U.S. born and bred animal. USDA is reporting that the animal was a 12 year-old Brahman-cross cow born and raised in Texas. Certainly no one is thrilled by the confirmation that BSE is endemic in the U.S. but there is some good news in all of this. First, BSE exists at a very low level in the U.S. cattle herd. After testing nearly 395,000 head of (mostly high-risk) cattle in the past year, only one case has been detected. Across the entire herd, this means that BSE is extremely rare in the U.S. It is likely that we will identify an occasional BSE case in the future and this does not appear to cause major consumer concerns and should not frighten producers. This will be true as long as consumers have confidence in the system and industry and government maintain credibility in efforts to manage the disease.

Secondly, although several months elapsed between the initial handling of the cow and final confirmation of the disease, the fact is that the cow never entered any commercial flow. The cow was initially delivered to a pet food manufacturer in Waco, Texas, but having been identified as a high-risk animal was held for testing and the carcass ultimately incinerated despite negative test results. The bottom line is that the system worked and this undoubtedly plays into the consumer confidence that has been observed this week.

Nevertheless, questions have been raised about USDA’s handling of the case. The industry has expressed frustration about changes in USDA’s testing protocol. Some have questioned why the mixed signals of the initial testing in November did not prompt use of the second “gold standard” test at that time. Although it seems obvious now with hindsight, the fact is that, at that time there was no reason to believe that the two tests would give different results. There would have been complaints then if USDA had changed the established protocol to permit use of the second internationally recognized test. This is not to say that USDA can’t do a better job as there is certainly there is room for improvement in USDA administrative procedures. The most important point in all this is that we want to be science-based and we must recognize that the state of knowledge about BSE is still limited and very dynamic. We must be prepared to make adjustments as the science of the disease develops. It is likely that we will need to make changes in the testing and management protocols in the future. The uncertainty is frustrating but it reinforces the need for the industry to remain nimble rather than rigid. There is life after BSE.



posted by Dr. Harlan Hughes 7:54 PM [edit]


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