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Mad-cow scare can set off panic and rattle beef industry

By Bradley Meacham
Seattle Times business reporter

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To get an idea of the potential economic blow from the mad-cow scare, just look north.

The discovery of brain-wasting mad-cow disease in a single steer in Alberta in May set off a worldwide panic that crippled Canada's $19 billion beef industry. Canadian consumers stopped buying meat, trade in cows came to a halt, and the United States, Japan and dozens of other countries banned imports of beef from Canada.

While the impact of a similar case of mad-cow found near Yakima this week probably won't be as dire because the U.S. industry is less dependent on exports, the experience of Canada shows what can happen when fear takes over.

"The cattle industry here was almost decimated," said Jim Crawford, co-owner of Olds Auction Mart, a market north of Calgary that sells about 110,000 cattle annually and has seen business fall by about 25 percent this year. "Public perception is everything. They think, 'I can't eat beef now because it's going to kill me.' Well, that's not the way it is."

Before the scare, Crawford's business was shipping thousands of live cattle across the U.S. border every day, sending them as far as Washington state, Texas and the Dakotas. In 2002, Canada exported beef worth more than $3.5 billion, with 90 percent of the shipments going to the United States, according to Statistics Canada. Shipments fell to almost zero during June, July and August.

Top export markets for Washington beef


Totals for the year that ended Sept. 30, in millions of dollars and percent of total. By late yesterday, all of these countries except for the Philippines had announced bans on imports of U.S. beef.

Japan: $38 million (55%)
South Korea: $19.7 (28%)
Hong Kong: $2.8 (4%)
Philippines: $1.8 (3%)
Thailand: $1.4 (2%)

Total for state: $69 million.

Source: U.S. Department of Commerce

Similar crises followed the earlier discovery of mad-cow in Britain and Japan, when consumers shunned beef and sent a financial shock through the food industries there, from farms to grocery stores.

Now the same thing could happen here on a smaller scale, potentially upsetting an industry that was profiting this year from the pinched supply from Canada, strong consumer demand and a falling U.S. dollar, which supports exports.

The U.S. beef industry is the world's largest, with $175 billion in sales and more than 1 million businesses, farms and ranches. Washington's meat-products industry makes up a small fraction of that, with $1.7 billion in gross income last year, according to the state Department of Revenue.

Closure of overseas markets to U.S. exports will hurt, but less than it did in Canada, which had exported 70 percent of its beef and cattle production before the bans. The U.S. exports about 10 percent of the beef it produces.

Nevertheless, if that 10 percent were redirected back into the domestic U.S. market, traders worry that it would cause a glut of beef here, depressing prices and hurting farmers and ranchers. Trading in cattle futures on the Chicago Mercantile Exchange was halted yesterday after it fell the maximum daily limit of 1.5 cents per pound.

Eric Hurlburt, an international trade specialist for the Washington Department of Agriculture, said the U.S. exported $1.3 billion worth of beef products during the 12 months through Sept. 30. Washington state exported $69 million worth during that time.

U.S., Canada are big beef exporters


• The United States has the second-largest share of the world beef market, with 16 percent in 2001. Australia had the top share with 23 percent, and Canada was third with about 15 percent.
• Canada exported about 70 percent of its total beef and cattle production in 2002. The U.S. exported about 10 percent.

Sources: Statistics Canada, U.S. Department of Agriculture

Washington exports beef to a total of 15 countries. Over the past six years, Japan has accounted for three-quarters of Washington's exports, Hurlburt said. During the past year, that share declined to about 55 percent, while Korea accounted for another 28 percent, and Mexico, Thailand, Hong Kong, the Philippines and other countries accounted for the remaining 16 percent, he said.

As of late yesterday, Australia, Brazil, Canada, Chile, China, Jamaica, Japan, Malaysia, Mexico, Russia, Singapore, South Africa, South Korea, Taiwan and Thailand had announced full or partial bans of imports from the U.S.

Until the cow was discovered near Yakima, cattle prices were going up, climbing 25 percent at the Chicago Mercantile Exchange since the May ban on Canadian beef, especially after a mad-cow case was discovered in Japan in October.

Retail beef prices hit a record $3.74 a pound in August, the highest since June 2001, according to the U.S. Department of Agriculture. The National Cattlemen's Beef Association forecast U.S. beef exports would hit a record $3.6 billion in 2003, up from $3.2 billion last year.

"Those guys have had a banner year, and now this will be a real kick in the teeth," Crawford said.

To overcome the drop-off in business, the beef industry in Alberta rallied with a campaign to explain the risks of beef to consumers, he said. Beef consumption in the province rose in July by 60 percent from a year earlier, he said, and Canadian farmers are expecting a lifting of the U.S. ban, possibly as soon as next month.

"You have to keep telling customers what you're doing. We built this industry on integrity of people doing their best," Crawford said, adding that renewed attention to safety will help the beef industry.

"In the long run, we're going to be better off," he said.

Seattle Times staff reporter Jane Hodges contributed to this report.

Bradley Meacham: 206-515-5066 or bmeacham@seattletimes.com


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