Published on 01/08/04

'Mad cow' case and beef prices

By Sharon Omahen
University of Georgia

How the first case of bovine spongiform encephalopathy, also known as "mad cow disease," in the United States affects the nation's beef market depends heavily on consumer reaction, a University of Georgia expert says.

The U.S. Department of Agriculture announced two weeks ago that a positive case of BSE had been found in an adult Holstein cow in Washington state.

Only 10 percent exported

"The market's reaction will obviously be negative, but the fall should not be as severe as in Canada," said John McKissick, an economist with the UGA College of Agricultural and Environmental Sciences. He heads the UGA Center for Agribusiness and Economic Development.

"Canada exports 50 to 60 percent of their beef, while we only export around 10 percent," he said. "Like Canadian consumers, U.S. consumers need to understand that BSE is not transmitted by eating muscle cuts of beef and that the infected tissue is isolated from all animals in the slaughter/processing process."

Consumer demand for beef in Canada didn't fall after BSE was found there last May because the consumers were aware, McKissick said.

News reports show U.S. beef products being pulled from grocery shelves overseas in reaction to the finding. But McKissick said U.S. beef prices would drop only by 15 percent if exports were closed for an extended time.

"While this is a significant hit, it's nowhere close to the 60 to 70 percent decline Canada experienced," he said.

"Furthermore," he said, "we don't expect our major trading partners -- Japan, South Korea, Canada and Mexico -- to remain closed if this proves to be an isolated case associated with the Canadian case, as it now appears."

Secretary assures U.S. beef is safe

U.S. Secretary of Agriculture Ann Veneman remains confident in the safety of the nation's beef supply. "The risk to human health from BSE is extremely low," she said in a news release.

BSE is a progressive neurological disease among cattle that is always fatal. It belongs to a family of diseases known as transmissible spongiform encephalopathies.

In the same family of illnesses is the human disease, variant Creutzfeldt-Jakob Disease (vCJD). It's believed to be caused by eating neural tissue, such as brain and spinal cord, from BSE-affected cattle.

Even without the BSE incident, McKissick had expected cattle and retail beef prices to retreat some from their record high prices of 2003.

"How much further prices fall will depend on how long the export market remains closed and, more importantly, U.S. consumer reaction," he said.

Consumers shouldn't rush to stock their freezers with low-priced beef. "Retail prices won't fall as much as live animal prices. (They will drop) perhaps 5 to 10 percent once the shock and uncertainty passes with consumers," McKissick said.

His prediction depends on this staying an isolated event, he said. Aggressive government actions to keep it from happening again and trace any future infection to its source are factors, too.

Cattlemen shouldn't panic

For U.S. cattlemen, the holidays were "a real roller coaster ride," said Robert Stewart, a UGA Extension animal scientist. "Now, we're somewhat in a wait-and-see mode."

Stewart urges farmers not to panic. "Cattlemen should hold their ground, as we will see the market rebound in their favor," he said. "This is similar to the dairy buyout in 1996. The market tumbled, but it recovered."

He agrees that the industry's fate lies in consumers' hands.

"Consumers should have the confidence they need to have that the beef they eat is safe," he said.

Sharon Omahen is a news editor with the University of Georgia College of Agricultural and Environmental Sciences.