Meat Matters

10 Years After The Cow That Stole Christmas

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Ten years after its first BSE case, the U.S. continues to battle to regain pre-BSE market access.

Do you remember how you heard the news of the U.S.’s first BSE case? I do. I was Christmas shopping on Dec. 23, 2003, when my cellphone rang. That’s when I heard about “the cow that stole Christmas,” as a USDA official later dubbed it.

Government and industry officials handled the discovery and subsequent publicity impressively. That was no surprise, seeing that they had been preparing for such an event for much of 2003. But no one could have imagined the financial damage the cow, ironically a Canadian-born Holstein, was set to inflict on the industry — damage that continues to this day.

The cow more than stole Christmas. She cost the industry billions of dollars in lost exports of beef cuts and variety meats. She added tens of millions of dollars of new operating costs for beef processors that continue to this day, and forced them to make many millions of dollars in new capital expenditures. New BSE-related rules also resulted in revenue losses after products were banned from the food supply. The loss of most export markets also briefly forced domestic beef and live cattle prices lower.

Export bans produced by far the largest cost. Seventy-five countries immediately shut their doors to U.S. beef. Presupposing that export values had remained at 2003’s $3.856 billion level in succeeding years, the industry lost $8.829 billion from 2004 to 2008 inclusive. Values in 2009 were down $774 million on 2003, but that was largely due to the global recession. Values finally exceeded the 2003 total in 2010, and reached $5.511 billion last year.

The U.S. Meat Export Federation (USMEF), however, had forecast that export values would keep increasing after 2003. With this in mind and the fact that the industry is still losing export values because of continued restricted access, USMEF says lost export sales are estimated to have cost the U.S. beef industry $16 billion from 2004 through 2012. This equates to around $65/head in live cattle terms.

Total U.S. beef industry losses arising from the loss of beef and offal exports during 2004 alone ranged from $3.2 billion to $4.7 billion. That’s according to a study by Kansas State University (KSU) published in April 2005. The study’s analysis included the increase in beef available on the domestic market, which KSU researchers concluded depressed domestic prices below levels they would have attained if exports were possible.

Live cattle prices fell by about 16% in the week after the announcement, the study noted. Consumer surveys at that time suggested that domestic beef demand could fall by as much as 15%. However, prices recovered in early 2004, as it became clear that U.S. consumer demand had been impacted only minimally, if at all. In fact, market data on beef disappearance and retail prices suggested that consumer demand for beef actually strengthened in the first half of 2004, the study found.

 

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All this suggests that the biggest lesson of the BSE case was that the U.S. government and industry prepared well for any domestic fallout, but drastically underestimated the reaction of the major international markets for U.S. beef. An allied lesson was how technically challenging it was to reopen two of the largest markets: Japan (in December 2005) and South Korea (in September 2006). Both openings saw subsequent closures after discoveries of vertebral material and bone fragments in beef shipments.

Another lesson involved the World Organisation for Animal Health (OIE). It took 9½ years for OIE to grant the U.S. “negligible” risk status for BSE. The new status might help persuade some of the 22 countries with full or partial bans on U.S. beef to relax those bans. Five South American countries, China and two others still ban all U.S. beef and cattle.

Ten years after its first BSE case, the U.S. continues to battle to regain pre-BSE market access.

Steve Kay is editor and publisher of Cattle Buyer's Weekly . See his weekly cattle market roundup each Friday afternoon at beefmagazine.com.

 

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Steve Kay offers a unique, big-picture perspective on the North American meat and livestock industry.

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Steve Kay is editor and publisher of Cattle Buyers Weekly (www.cattlebuyersweekly.com ) subscription newsletter, the number-one marketing and business newsletter for the meat and livestock...

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