010221 U.S. Beef Producers Face Slow Economy

San Antonio, TX - America's taste for beef was unabated last year as consumption hit a record high, but a slowing economy and consumer worry about mad cow disease will make 2001 a tougher year, cattle industry officials said.

The National Cattlemen's Beef Association, the largest U.S. cattle producers group, convened its annual meeting here with its yearly summary of supply and demand painting a picture of record demand and high prices in 2000.

But NCBA officials also acknowledged clouds on the horizon, which include concerns that Europe's scare over mad cow disease, or bovine spongiform encephalopathy (BSE), could spread to the United States and hurt beef demand.

“2001 is going to be difficult even without BSE, as we see a slowing economy,” Chuck Lambert, the NCBA's chief economist, said in an interview. “Beef prices will be higher as supplies tighten and pork production is expected to increase. We will see those competitive pressures intensify.”

But he also predicted that BSE “as an issue will not affect beef demand in 2001. BSE is a short-term aberration. I think indications are that the markets have digested the information.”

Last week the Food and Drug Administration quarantined 1,222 head of cattle at a Texas feedlot near here on suspicion the animals had accidentally been fed ground-up parts of other ruminant animals in the form of meat and bone meal.

That ingredient has been banned since 1997 because of fears that it transmits mad cow disease.

BSE is a brain-wasting disease in cattle first detected in Britain. Scientists believe that eating BSE-tainted beef may cause a human brain disease called variant Creutzfeldt-Jakob Disease, which has claimed more than 80 lives in Europe.

No mad cow disease has been detected in the U.S. and scientists believe the chances of it crossing the Atlantic are low. But last week's FDA move in Texas - - the largest U.S. cattle producing state -- sparked a storm of media coverage and briefly hit cattle prices on the Chicago Mercantile Exchange this week on fears that U.S. beef demand would fall.

The NCBA, which convened a meeting of meat and feed industry officials and regulators in Washington last week to push for “zero tolerance” in the fight against mad cow, said it had no evidence that U.S. beef demand had been affected by the FDA quarantine and the publicity it received.

“There is simply no way to predict that. If there is, we expect it to be small,” said Rick McCarty, executive director of issues management at the NCBA.

Mad cow fears swept Europe late last year as France and other European countries reported their first cases of BSE in cattle. Fast food giant McDonald's Corp. last week reported lower fourth-quarter earnings, citing plummeting beef demand in Europe.

But in the same period, U.S. beef demand kept growing.

According to the NCBA's annual summary, U.S. consumer demand for beef rose 3.6% in 2000 compared to 1999. Demand for the fourth quarter marked a seventh consecutive quarter of rising beef consumption.

U.S. consumers spent a record $52 billion on beef last year, up $3.3 billion from 1999. Americans spent about $191 per person, up about $10 per capita from 1999 and $13 from 1990.

By comparison, per capita spending for pork was about $139, up $7, and for chicken $127 per person, a $5 rise.

On average, each American consumed 66.2 pounds of beef for the year, compared to 50.5 pounds of pork and 55.8 pounds of chicken, the NCBA said.

Beef demand had hit a 10-year low of 61.6 pounds in 1993.

A strong economy helped fuel increased spending for beef last year, while higher retail beef prices also contributed to the spending rise, NCBA said. Retail beef prices averaged $2.75 per pound in 2000, compared to $2.61 in 1999.

U.S. beef supplies last year also reached a record high of more than 26.8 billion pounds.

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