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BSE Beef Export Losses over $3 Billion

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Friday, April 29, 2005 Good Afternoon!

BSE Beef Export Losses over $3 Billion (04/28/05 12:15)

OMAHA (DTN) -- Bovine spongiform encephalopathy has caused economic losses to the U.S. beef industry of up to $4.7 billion, says a study from the Kansas Department of Agriculture and K-State Research and Extension, according to press release from Kansas State.

"The Economic Impact of BSE on the U.S. Beef Industry" provides an assessment of the economic impact of lost export markets and policy changes affecting cattle procurement and processing.

"The most significant economic impact of BSE is from lost beef export markets," said Kansas Secretary of Agriculture Adrian Polansky. "Alone, they accounted for a $3.2 billion to $4.7 billion revenue loss to the U.S. beef industry last year."

Within days of the U.S. Department of Agriculture's late 2003 announcement that a cow in Washington state had been diagnosed with bovine spongiform encephalopathy, 53 countries banned imports of U.S. cattle and beef. In 2003, U.S. beef exports were valued at $3.95 billion and accounted for 9.6 percent of U.S. commercial beef production.

Five countries -- Japan, Mexico, South Korea, Canada and Hong Kong -- received 90 percent of U.S. beef exports in 2003.

Mexico and Canada partially resumed beef imports in 2004, but overall the quantity of U.S. exports fell by 82 percent below 2003 levels. Japan and South Korea have agreed in principle to resume beef imports from the United States, but neither country has committed to a date when that will occur.

"Kansas' fifth-largest export market in 2003 was Taiwan, and they resumed beef imports a little more than a week ago" Polansky said. "It's progress, but we really need access to markets like Japan, which accounted for 35 percent of all U.S. beef export value in 2003."

The report evaluates the potential impact BSE testing could have if it were used to regain export markets. Researchers estimate that it would have cost about $640 million to test all cattle slaughtered in the United States in 2004, but that figure does not include any investment needed to place testing facilities in a beef processing plant.

"The cost of equipping a facility to perform the tests varies substantially from one operation to another," said K-State professor of agricultural economics James Mintert. "We focused on the known expenses; the tests and the labor to conduct them."

Mintert led the research team which included K-State professors of agricultural economics Sean Fox and Ted Schroeder, and research assistants Brian Coffey and Luc Valentin. The study was commissioned by the Kansas Department of Agriculture.

Researchers estimated that the revenue gain would equal testing costs if the United States regained about 25 percent of the Japanese and South Korean export markets and the United States was testing roughly 75 percent of commercial cattle slaughtered. However, if half of those markets were regained with only 25 percent of cattle tested at slaughter, the wholesale revenue gain would be $22.84 per head. Whether such market access would be attainable with this level of testing was not addressed in the study.

"According to the research, if voluntary testing of 25 percent of U.S. slaughter cattle allowed the industry to regain access to the Japanese and South Korean export markets, and the U.S. was able to ship just one-half the quantity shipped during 2003, the potential return to the beef industry would have been nearly $750 million," Polansky said.

To strengthen existing firewalls to prevent BSE and to boost consumer confidence in American beef, USDA introduced new and updated regulations in 2004. The report provides an objective assessment of the economic impact of those changes.

K-State researchers polled seven firms representing more than 60 percent of 2003 beef slaughter to get the data needed to assess the cost of new regulations. The firms involved were sufficiently diverse to represent a reasonable cross-section of the beef packing industry.

Regulations issued in 2004 by USDA's Food Safety and Inspection Service had an estimated net cost to the beef industry of approximately $200 million, plus some one-time investments that were substantial, but varied widely from firm to firm.

Those costs related to the inability to market non-ambulatory cattle, the need to age cattle presented for slaughter, to segregate and process separately cattle older than 30 months and to prevent certain tissues from entering the food supply.

To offset the cost of complying with new regulations, packers are paying less for cattle over 30 months of age.

According to USDA, some packers reported discounting cattle over 30 months of age by as much as $35 for every 100 pounds of carcass weight. However, average packer discounts for cattle over 30 months of age were closer to $10 per 100 pounds of carcass weight.

The regulations also led to changes in cattle procurement, employment, employee training requirements, food safety plans, capital investments and marketing opportunities for the beef industry.

While some new jobs were created to comply with the new regulations, overall there were more jobs lost.

Job gains were due to the need to age cattle. Job losses were tied to closed export markets and condemnation of certain beef by-products.

The study also examined potential costs related to feed regulations being considered by the Food and Drug Administration. Last July, FDA published an advance notice of proposed rulemaking seeking input on regulation changes the agency was considering to ban from cattle feed all bovine blood products, plate waste and poultry litter, and to require dedicated equipment for producing ruminant and non-ruminant feed to prevent cross-contamination.

To date, FDA has not made the rules final.

"BSE-related policies will continue to evolve, and the analysis provided by the research team should be beneficial to that process," Polansky said. "The best regulations are those that provide consumer and animal health protection without being particularly onerous on industry."

Also examined in the study was the economic impact of USDA's rule that prohibits non-ambulatory cattle from entering the food supply. The beef industry contends that injured non-ambulatory animals can be distinguished from animals that are non-ambulatory due to symptoms that place the animal at high-risk of having BSE. The inability to market any non-ambulatory cattle means the industry lost revenue because of the new regulations.

"Assuming that 95 percent of non-ambulatory cattle in 2004 passed the standards in place before USDA enacted its ban on non-ambulatory cattle entering the food supply, the economic benefit could have been more than $63 million," Mintert said.
According to USDA, some packers reported discounting cattle over 30 months of age by as much as $35 for every 100 pounds of carcass weight. However, average packer discounts for cattle over 30 months of age were closer to $10 per 100 pounds of carcass weight.
THE Canadians got shafted even worse!!!!!!!!!!1
oldtimer you only have r-calf to blame for that.Make sure you send them a thank you card...

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