Mad cow case seen as no bar to record beef exports

Cattle Cattle

April 26 (Bloomberg) -- The first time mad cow disease appeared in the U.S., beef exports plunged 82%. More than eight years later, the discovery of an infected dairy cow in California may do little to prevent shipments from surging to a record for a second straight year.

U.S. beef sales to buyers including Mexico, China and Japan will jump 6% to 1.34 million metric tons in 2012, exceeding last year’s record, which the government valued at $4.7 billion, said Global AgriTrends, a Denver-based researcher that advises meat companies, investment banks and hedge funds. The company affirmed its forecast after the U.S. reported its fourth case of mad cow since 2003 and first since 2006.

Detection of the tainted carcass before it entered the human food chain should bolster confidence that U.S. meat is safe, the United Nations’ Food and Agriculture Organization said yesterday, as cattle prices rebounded in Chicago. Canada, Mexico, Japan and South Korea, the four biggest buyers of U.S. beef, said they won’t halt purchases, bolstering prospects for agricultural exports that are a foundation of President Barack Obama’s goal of doubling U.S. sales overseas by 2015.

“The world market has shown that it can absorb any new mad cow information without causing a disruption in trade,” said Chris Hitch, the president of Hitch Enterprises in Guymon, Oklahoma, which owns two feedlots that can hold about 90,000 head of cattle. “International demand for beef is growing, and will continue to grow, with rising incomes in developing nations, especially Asia.”

Recovering Exports

Last year was the first that U.S. beef exports topped those of 2003, before the brain-wasting disease known as bovine spongiform encephalopathy, or BSE, was found in a Washington state cow imported from Canada. Shipments in 2004 plunged to 460.3 million pounds (208,789 metric tons) from 2.52 billion pounds a year earlier, as dozens of countries closed borders to U.S. beef and cattle futures had the biggest monthly drop ever.

Since then, the U.S. has reported three more cases of mad cow disease. During that period, domestic beef processors slaughtered about 271.9 million cattle, government data show. Canada had 17 cases since 2003, while the U.K. had 817, according to the World Organisation for Animal Health.

As importers eased restrictions, cattle futures rose to a record $1.315 a pound on Feb. 22 on the Chicago Mercantile Exchange, and retail-beef prices were the highest ever last month, government data show. When the U.S. Department of Agriculture reported a tainted cow carcass had been found on April 24, cattle plunged the most in 11 months, dropping the maximum allowed by the CME to $1.11575. Prices rose 0.6% yesterday and advanced another 0.1% today.

Importers Buy

Japan won’t suspend imports because shipments are made under a framework that assumes the disease isn’t eradicated, Minoru Yamamoto, director at the farm ministry’s international animal health affairs office, said yesterday. Taiwan doesn’t plan to change existing rules, said Tai Yu-yen, chief secretary of the Council of Agriculture.

Mexico’s Agriculture Ministry expects its cattle trade with the U.S. to remain unchanged, and European Union spokesman Frederic Vincent said the EU plans no measures in response to the case. Canada said the finding won’t affect trade with the U.S. Indonesian Agriculture Minister Suswono said today that imports of U.S. beef shipped after April 24 would be suspended. The country bought 0.4% of U.S. shipments last year by value, data from the U.S. Meat Export Federation show.

“On the basis of one case that’s isolated and the carcass had not entered into the food chain, we’ll see a knee-jerk reaction in cattle prices like we did,” said Steve Shafer, the chief investment officer at Covenant Global Investors, an Oklahoma City-based hedge fund that manages $320 million in assets. “That’s normal. If there’s no further cases, I wouldn’t expect any action at this point.”

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