| The recent diagnosis
of mad-cow disease in the U.S., though maybe insignificant
in extent and magnitude, has had its economic
impact on the beef industry. The U.S. beef was
among the most preferred beef in the global market.
While the domestic beef market has been unaffected,
the major blow to the industry came from the export
sector, as many countries introduced ban on beef
from the United States.
While countries undertake to resolve the crisis,
testing of cattle for mad cow disease is considered
so that health imperatives of the food industry
are achieved. However, mandatory testing of each
cattle for mad cow disease has not been favorably
considered due its impact on the price of beef,
and also due to the possibility of unethical manipulation
of the market. The paper attempts to analyze the
economic impact of mad cow disease on the U.S.
beef industry and the considerations for resolution
of the issue.
Before attempting to understand the economic impact
of mad cow disease, it would be worthwhile to
know what the disease is, the nature and its impact
on human consumers and the occurrence of mad cow
disease in the U.S.
The Mad-Cow Disease and its Occurrence in the
US
The commonly known mad cow disease is scientifically
called bovine spongiform encephalopathy (BSE).
It is a transmissible, progressive and fatal neurologic
disorder found in cattle supposedly caused by
abnormally folded proteins called prions. Although
the source of the BSE agent is uncertain, feeding
cattle BSE-contaminated proteins from an infected
animal such as meat-and-bone meal is considered
to amplify the disease among cattle. [Wells, 1987]
BSE agent is transmitted to humans through consumption
of BSE-contaminated cattle products and causes
vCJD -- a new variant of Creutzfeldt-Jakob disease
(CJD), the human form of BSE-- a brain degenerative
disease causing death. [Brown, et al, 2001]
BSE was first identified in 1986 in the United
Kingdom, and affected a large herd of cattle.
The first case of BSE was diagnosed by the U.S.
Department of Agriculture (USDA) on December 23,
2003, in a single “downer’ –
a nonambulatory, disabled 6 1/2-year-old Holstein
dairy cow in Washington state. On December 25,
the BSE international reference laboratory in
Weybridge, England confirmed the diagnosis. [Consumer
Reports, 2004]
The Economic Impact of Mad Cow Disease on the
US Beef Industry
As on April 2004 only one cow among 96 million
head of cattle in the United States was tested
positive for mad cow disease. However since the
first case of the disease was identified in December
2003, 58 countries have instituted some form of
ban on U.S. beef. [Raine, 2004] Apart from the
export loss, is the losses in terms of jobs and
related services. This would severely harm the
economic health of U.S. agriculture as a whole.
The cattle industry is the largest sector of U.S.
agriculture -- beef and dairy production together
contribute over 40% of nation’s agricultural
production. [Segarra and Rawson, 2001] In 2003
the total beef production was valued at USD 27
billion, of which USD 3.266 billion was exported.
[U.S. Department of Agriculture, Cited Raine,
2004] The 2004 export figures would be toppled
by the export ban. Steven Kay, estimates that
‘the export ban may be costing the U.S.
beef industry and the nation's economy
"anywhere from $100 million to $300 million
per week,” considering the ripple effect
of lost income and sales.’ [Cited Raine,
2004] Kay is also reported to have estimated that
about 1,000 jobs were lost in meat packing and
other related fields between December 2003 and
April 2004.
Japan is the largest importer of U.S. beef, consuming
32 percent of U.S. exports, the other major importers
being South Korea, Mexico and Canada. Immediately
after diagnosis of the first mad cow case, Japan
enacted a ban on U.S. beef days. While negotiations
are underway to reopen the market, Japan insists
that all cattle used to produce beef for export
to Japan be tested for the disease. Whilst South
Korea continues to ban US beef imports, trade
negotiations with Mexico and Canada have been
largely successful as beef trade with these countries
are normalizing. [Raine, 2004]
While the export markets, particularly the Japanese
and South Korean markets have condoned the use
U.S. beef, the domestic demand remained strong
and consumers remained confident in the U.S. beef
supply. [Raine, 2004] Reports suggest that the
cases of mad cow disease have not troubled the
US public so much. The U.S ban on Canadian beef,
following the Canadian case of BSE, had resulted
in an increase in domestic beef prices due to
limited supply, according to the Economic Research
Service of the Agriculture Department beef prices
increased almost thirty percent in one year and
estimates that the prices would remain high. [Cited
Ritter, 2004] The recent craze for low-carb, high
protein food with a view of reducing weight had
also increased the demand for beef, impacting
the beef prices. [Ritter, 2004]
U.S. Department of Agriculture and the industry
has been reluctant in yielding to Japan’s
insistence on testing each individual cattle send
to slaughter, as the measure would in turn impact
the price and competitiveness of U.S. beef. More
over, since cattle younger than 30 months are
not vulnerable to the disease (average incubation
for BSE symptoms is 2 to 8 years) and there is
no transmission between animals, the industry
and trade representatives consider Japan’s
trade restriction as unreasonable. However, it
is understood that the negotiators are arriving
at a consensus on an expanded surveillance effort
for mad cow disease. The industry and agricultural
officials also suspect the unethical market manipulations
that would arise from 100 percent testing. [Author
Unknown, 2004] However, given the imperatives
of health and safety associated with consuming
BSE infected beef, expanded testing of cattle
for mad cow disease may be warranted, though it
would impact the price and competitiveness.
Also, the Consumers Union of U.S. reports that
a panel of internationally recognized experts
had recommended in February 2004 that the USDA
test not only all downer cows but also a random
sample of cows over 30 months old that look healthy.
The report indicates that consumers are in favor
of testing all animals for the disease, even if
it results in higher beef prices. [Consumer Reports,
2004] The Japanese beef industry follows stringent
testing norms as every cow is tested for the disease.
This implies that the price competitiveness of
US beef in the export market would not be affected
by the increase in beef price due to testing.
Hence United States Department of Agriculture
ought to favor or determine the expanded testing
of cattle by producers before slaughtering.
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