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Question of the Month -January 2004
Q:
A:
Two factors mitigate the impact for U.S. cattlemen with respect to the outbreak, and a third factor may also come into play. The first two are the relatively small portion of total U.S. beef production which is for export and the already tight supply and high demand domestically for beef. Because of the latter, American beef producers are enjoying record high prices for cattle and the industry is in a better economic position to weather a constriction in sales. The final factor is the high confidence American and foreign consumers have in the U.S. food regulatory and safety inspection system.
Nonetheless, the loss of most export markets, and some decline in domestic consumption, is predicted to amount to major losses for the industry, and will be felt in the South. Texas is the number one cattle producing state in the country , with Oklahoma fourth in total cattle inventory. The following table illustrates the size and value of cattle inventories and marketings in the South as of January 1, 2003.
Source: United States Department of Agriculture, National Agricultural Statistics Service, Cattle, January 31, 2003 and Meat Animals Production, Disposition, and Income 2002 Summary, April 2003.
If the outbreak remains limited to one cow, it is likely that the recent actions by the USDA banning the introduction of downer cattle into the human food chain, prohibiting the use of small intestines, head or spinal tissue from cattle over 30 months of age, increased surveillance for BSE, and a national animal identification program for cattle should quickly restore international confidence in U.S. beef. Should this be the case, the impact on the beef industry should be, while harmful, short-lived. The strength of the domestic market distinguishes the U.S. outbreak from that in Canada, which has created extreme hardship across an industry that is a major export earner for the country. With a between 50 and 60 percent of Canadian beef production destined for foreign markets, including a 70 percent share heading to the United States, the closure of the essentially open border (for cattle) between the United States and Canada and the loss of numerous other markets denied the country of vital outlets and plunged numerous Canadian cattlemen to the brink of bankruptcy.
With the loss of export sales, the increase of cattle production available for domestic sales should drop retail beef prices, which could create an upswing in domestic beef consumption—already an average of 67 pounds of beef per person per year. Brian Roe, an expert on the beef industry at the Ohio State University, points to an 8 percent to 10 percent drop in farm prices related to the recent BSE discovery. In dollar terms, beef industry analysts have predicted widely varying outcomes, with some as little as $1 billion to high-range impacts of over $4 billion. The beef industry as a whole was worth nearly $100 billion in 2003, with just under $3 billion of that income from exports.
It should be noted that downer cows include all cattle arriving at a slaughterhouse that are unable to walk, including those injured calving, on farm or in transit, as well as those animals who are diseased. Because animals with BSE are often unable to walk or stand, downer cattle were being prime candidates for testing for the disease, and all spinal material was to be removed from all downer cattle at a slaughterhouse, regardless of the presumptive reason for the animal’s non-ambulatory state. BSE is related to scrapies, which affects sheep, chronic wasting disease in deer and elk, and variant Creutzfeldt-Jacob disease (vCJD) in humans. In the United Kingdom, 143 people have died from vCJD contracted through eating infected beef.
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