041182 New BSE Report May Hurt Market

Sioux Falls, SD - News that a second case of bovine spongiform encephalopathy may have turned up in the United States is already driving down prices, even though meat from the suspect animal has not entered the food chain, cattle producers said Nov. 18.

"The market is free-falling for fat cattle and feeder cattle," said Rick Fox, vice president of the South Dakota Stockgrowers Association. "It's driving the market down without justification because there's no positive test."

Cattle producers said the announcement could have an immediate impact on business, where fluctuations in price are magnified by the large number of livestock sold.

The announcement could cost Lubbock Feeders, a west Texas operation that fattens about 70,000 head of cattle a year, as much as $25 a head in the four to seven days it will take for results to come back, manager Kyle Williams said Nov. 18.

"If it is positive, it could cost us twice as much or more," Williams said. That would cut into the $1,020 selling price of a typical 1,200- pound cow.

The U.S. Department of Agriculture Nov. 18 gave no information on the location or origin of the slaughtered animal. It said results from advanced tests were not expected before four to seven days, sending shivers through the nation's cattle industry and food processors and beef-oriented restaurant chains.

Officials released few details and refused to say where the possibly diseased animal was found. They said it would be four to seven days before more could be confirmed, a delay that livestock industry representatives said would cause turmoil in the beef market.

Andrea Morgan, associate deputy administrator of the USDA's Animal and Plant Health Inspection Service said initial efforts had begun to trace back the animal from where it was tested to the farm from which it originated.

State agriculture officials said the animal did not originate in Kansas, Montana, New Jersey, North Carolina, North Dakota or Wyoming.

Barb Powers, director of Colorado State University's Veterinary Diagnostic Laboratory in Fort Collins, Colo., which handles BSE tests for the government, said she learned of the new possibility from news reports. That indicated it may not have not come from Colorado, Hawaii, Illinois, Indiana, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota, Utah or Wyoming.

Additional checks are being conducted after initial testing proved inconclusive on the suspect meat, which the officials said never entered the food or feed chain.

December live cattle fell 2.70 cents to 84.62 cents a pound on the Chicago Mercantile Exchange. January feeder cattle fell 3 cents to $1.007 a pound.

Tyson Foods Inc., the world's largest meat producer, said it is too early to gauge the impact of the government's announcement.

"It's premature for us to speculate, especially since the testing process is not complete and since previous inconclusive tests turned out to be negative," Tyson spokesman Gary Mickelson said.

Shares of Tyson Foods closed down 29 cents, or 1.7%, at $16.63 on the New York Stock Exchange Nov. 18. McDonald's Corp. closed down 45 cents to $29.95.

John Lawrence, a livestock economist with the Iowa State University Extension, said the announcement has caused a market setback. But if final tests turn out negative for mad cow disease, markets would return to normal in about a week.

"If this turns out to be a positive, then we may see more of an effect," Lawrence said.

BSE attacks an animal's nervous system. People who eat food contaminated with BSE can contract a rare disease that is nearly always fatal, variant Creutzfeldt-Jakob disease.

The possible case comes 11 months after the United States, one of the world's largest beef exporters, had its first confirmed instance of BSE in a Canadian-born Holstein.

That one case caused Japan and more than three dozen other countries to refuse U.S. beef.

As a result, U.S. beef exports that totaled $2.6 billion in 2003 will likely drop to just $400 million this year, according to David Weaber, director of research for Cattle- Fax of Centennial, Colo., which tracks the industry.

The markets have regained ground, thanks in part to the popularity of high-protein diets and an easing of an import ban by Mexico, one of the largest buyers of U.S. beef.

But the timing of the Nov. 18 announcement was bad because just last month U.S. and Japanese negotiators struck a tentative deal to allow limited imports of American beef into Japan for the first time since Tokyo closed its billion-dollar market last year.

Lawrence said he doesn't anticipate the preliminary announcement will hurt exports or U.S. officials' efforts to negotiate final details of the agreement with Japan. He said the cow in question wouldn't even have been a candidate to go to Japan.

"We entered negotiations with Japan with them knowing full well we were in the surveillance program, that we may find others and still they went forward with the agreement," Lawrence said.

Elected officials and cattle producers expressed concerns Nov. 18 that the USDA continues to support inconclusive tests.

"I don't know what the answer is, but the market just reels whenever they announce one of these" said Kevin Crooks, a producer who raises thousands of cattle near Tulia, Texas.

Just before the start of the July Fourth weekend, the USDA announced two other possible cases of the brain-wasting illness in the United States--but then said follow-up testing had proved negative. Both were subjected to the more definitive testing after initial screenings for infection were inconclusive.

Fox said the department should do its inconclusive tests, send them for verification to the lab in Ames, Iowa, and get its facts straight before releasing any information.

"It's either yes or no," he said. "Right now, you're in limbo."

U.S. Rep. Stephanie Herseth, D-SD, who serves on the House Agriculture Committee, said while most producers feel such reports will always hurt the cattle market, some believe the policy of reporting inconclusive results will desensitize the market over time.

But Fox feels it'll take a while for the cattle markets to bounce back from the Nov. 17 report, regardless of the final results.

He compares the cattle markets to the oil industry, in which negative news have more of an impact on prices than positive news.

"It takes time to build a market," Fox said.

Herseth said the worst case would be if the test is confirmed and the animal is not traced back to Canada. "I don't even want to think too far down that line at this point," she said.

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