010354 Markets Brace for Foot-And-Mouth Volatility

London/Chicago - Commodities markets braced for another day of volatile trading as governments scrambled to contain the spread of foot-and-mouth disease, which imperiled livestock and threatened to play havoc with agricultural economies around the world.

Britain, the epicenter of the latest outbreak of the highly contagious disease, moved forward with its plan to destroy even healthy animals that have loose connections to affected areas.

Pork prices at the Chicago Mercantile Exchange rose sharply on Thursday, as traders expected bans on meat imports from Europe to increase demand for U.S. meat. But at the Chicago Board of Trade, prices of feed ingredients such as corn and soybean meal tumbled because of fears that widespread slaughter of livestock herds will leave fewer animals to feed.

Chicago wheat prices fell sharply after it appeared less likely some importing countries would shun European wheat in their efforts to avoid foot-and-mouth. Morocco and Tunisia said they had not banned such imports, contrary to earlier reports.

The head of a world animal health organization said no official scientific basis exists to ban imports of grain from a country that has had an outbreak of foot-and-mouth. “The risk linked to grain is close to zero,” Bernard Vallat, director-general of the Office International des Epizooties (World organization for animal health), said.

With rumors swirling in commodities markets, Japan's Agriculture Ministry denied that one of the world's biggest meat importers may have reimposed a ban on pork imports from its number one supplier, Denmark.

Ministry officials reiterated that Japan would be cautious about extending its ban on imports from France and Britain of products of cloven-hoofed animals to the rest of the European Union .

“There has been no change in our position against the foot-and-mouth disease,” said an official at the ministry's animal health division.

Just A Matter Of Time

In Germany, which has not had a case of foot-and-mouth since 1988, a regional environment minister said it was only a matter of time until the disease spread to Germany.

“I expect that the disease will hit Germany too,” Baerbel Hoehn, environment minister in the big western state of North Rhine-Westphalia, told the Rheinische Post. “The chances are much higher now because it's clear the disease has arrived on mainland Europe,” including at least one outbreak in France.

Portugal said it would vaccinate livestock if the disease were to spread from France to Spain. The European Union does not currently allow vaccination, which is expensive and not wholly effective. The Netherlands plans to seek a lifting of the ban on preventive vaccination at a meeting of European agricultural ministers next wewk in Brussels.

The United States, which banned imports of raw meat from the European Union early last week, issued a similar ban on meat from Argentina, where an outbreak was confirmed.

HAS U.S. GONE TOO FAR?

A European Union official complained that the United States had gone too far in banning shipments of live animals and raw meat from the entire 15-member EU, since only Britain and France have confirmed outbreaks of the disease.

“An all-out ban in our view is disproportionate and it's the simple option,” Gerry Kiely, agriculture counselor for the European Commission 's delegation in Washington, said. “On issues like this, where the U.S. leads, there is always the risk of others following and its effect on other markets.”

As the rest of the world went on red alert, Britain said it would bring in the army for logistical support. “We are intensifying the slaughter of animals at risk in the areas of the country, thankfully still limited, where the disease has spread,” Agriculture Minister Nick Brown told parliament.

Foot-and-mouth can affect cattle, sheep, pigs and goats but rarely affects humans. It can spread like wildfire on clothes, vehicle tires and even the wind, causing fever and blisters mainly on the mouth and feet of cloven-hoofed animals.

Slaughter, Quarantine, Hope

In the United Arab Emirates, Ali Arab, head of the livestock department at the Agriculture Ministry, said that in Dubai eight infected cattle had been killed and a quarantine imposed on farms where the cases had been found.

That outbreak and a report from Saudi Arabia that two calves had been found with the disease were the first in Gulf states. “The UAE is now free of foot-and-mouth disease,” he said, denying media reports of further cases.

Even as Morocco and Tunisia, important export markets for the region's wheat, said they would not ban EU grains, new meat bans came thick and fast. Bulgaria was the latest country to ban imports from Argentina, following the United States and the EU. Romania, meanwhile, banned imports of cattle, pigs, sheep and goats from all European Union countries.

Austria pinpointed France, slapping a ban on its imports of cloven-hoofed animals and related meat products, while Turkey said it was due to ban imports of all milk products except those made of pasteurized milk, as well as animal skins and wool from countries with disease outbreaks.

The fresh bans will spur meat markets in the United States, and traders in Japan were saying importers were scrabbling for pork from the United States and Canada.

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