They call her the “index cow” — the cow that stole Christmas when she was discovered to have bovine spongiform encephalopathy (BSE) Dec. 23, 2003. Her legacy continues to raid every segment of the U.S beef industry.
The National Cattlemen's Beef Association (NCBA) estimates the cost of implementing new regulations directly addressing BSE could hit $300 million/year. Meanwhile, the lost revenue from the non-ambulatory ban could eclipse $50 million/year.
Cattle-Fax says the removal of specified risk materials from beef at slaughter will cost beef processors $100 million/year. The loss of use of advanced meat recovery systems could be another $15 million/year.
USDA announced in March it plans to increase BSE testing to about 200,000 head annually. NCBA chief economist Gregg Doud pegs the cost at $30 or more/animal.
When the U.S. Animal Health Association endorsed implementation of a national animal identification (ID) system last fall, it estimated a comprehensive ID plan would run around $15/animal/year.
Of course, the above accounting doesn't include the loss of domestic and foreign beef markets, or the impacts on cattle prices.
$5.5 Billion This Year?
Early on, a 10% drop in 2004 U.S. farm income due to BSE was predicted. Global Insight (GI) Inc., an international think tank in business and economic forecasting, recently updated the prediction, saying 2004 U.S. net farm income will be down $5.5 billion from 2003 — mostly due to the index cow.
In 2003, the U.S. beef export value was $3.3 billion. Before the BSE discovery, 2004 exports were predicted to grow 0.5%. However, GI says the forecast has been cut 75% from the 2003 level.
GI says each $10/cwt. drop in average price of fed and feeder cattle, and cows will lower U.S. farm cash receipts nearly $2 billion/quarter.
Prior to Dec. 23, beef prices had been at record levels, with fed prices at $90/cwt. after topping $100/cwt. in October and November. Today, prices for nearly every cattle class are higher than last year. Beef-cutout prices are higher. Even export-sensitive, by-product prices are significantly higher.
The 2003 Beef Demand Index increased more than 5% compared to 2002, and more than 15.4% since reversing a 20-year decline in 1998. The index is a reflection of per-capita consumption and consumer spending for beef. There's no indication this trend has changed, says Charlene Schuster, executive director of the Montana Beef Council.
“We fully expect demand will continue to outpace that of a year earlier,” she says. “And, the second quarter is traditionally the strongest demand period.”