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Bloomberg News Tuesday May 22, 2007 4:19 p.m. EDT

U.S., Canada Designated `Controlled-Risk' for BSE (Update 4)

By Alan Bjerga and Daniel J. Goldstein

     May 22 (Bloomberg) -- The U.S. and Canada have been classified ``controlled-risk'' nations for mad-cow disease by the World Organization for Animal Health, a designation that may help
revive beef exports that plummeted after outbreaks in 2003.

     The Paris-based organization voted to give the two countries its second-best safety rating for mad-cow disease risk, officials said. The designation means measures taken to control the ailment are effective and that U.S. beef from cattle of any age can be safely traded, U.S. Agriculture Secretary Mike Johanns said.

     The discovery of mad-cow disease in the U.S. led to the collapse of U.S. beef exports valued at $3.8 billion and contributed to a string of six straight losses in the beef business of Tyson Foods Inc., the world's biggest producer of the meat. U.S. beef exports are still running at only about half the volume of 2003, according to government statistics.

     ``I hope it is the start of the final chapter of what I would describe as one of the ultimate trade distortions without science I've ever seen,'' Johanns told reporters today in Washington.
     The U.S., which slaughters about 35 million head of cattle a year, has had three case of mad-cow disease, or bovine spongiform encephalopathy, since December 2003, one of which was in an animal born in Canada and sent to the U.S. in September 2001.

Feed Ban

     Canada has had 10 cases since May 2003. Six of the infected animals were born after a 1997 ban on using feed that contains ground-up cattle parts -- which scientists say is how the disease is spread among livestock -- raising questions about Canada's enforcement of the ban.

      The U.S. enacted a similar ban in 1997. In 2003, both countries required the removal at slaughter of the brain, spinal cord and parts of the intestine, which are thought to contain the
agent that causes BSE. The disease has never been found in muscle cuts of meat.

     The improved rating by the World Organization, known as the OIE, may persuade Japan, South Korea, China and other countries to accept U.S. beef products and cuts of meat they have rejected since December 2003, Johanns said during a break in trade meetings with Chinese officials in Washington.

     China still refuses to accept U.S. beef from cows 30 months or older. Johanns wouldn't speculate on whether the new OIE designation would affect beef trade with China, South Korea or Japan.

Age Restrictions

     The three Asian nations last year agreed to resume imports with limitations on the age of the animals from which the beef is cut. U.S. trade officials are now trying to persuade them to do away with age restrictions.

     Japan accepts only also boneless cuts of beef from animals 20 months and younger while South Korea only allows cuts from animals 30 months and younger. Before 2004, Japan was the biggest overseas buyer of U.S. beef, while South Korea was number-three.

     ``I've always hesitated to give a timeline'' as to when markets may reopen, Johanns said. ``I hope it's a situation where they respond very quickly.''

     American Meat Institute President J. Patrick Boyle said he hopes the ruling will ``give our trading partners full confidence'' in U.S. beef exports.

     ``There is no doubt U.S. cattle are healthy and U.S. beef is safe,'' Boyle said in a statement. The Washington-based AMI represents Tyson, Cargill and other big meatpackers.

 USDA Criticized

     The Ranchers-Cattlemen Action Legal Fund-United Stockgrowers of America, which sued the USDA in 2005 to halt imports of Canadian cattle, said the department should have pushed harder for the OIE's top rating of ``negligible'' risk.

     ``The rest of the world knows that Canada has an inherently higher risk for BSE than the United States, so the U.S. has basically sold itself short,'' Bill Bullard, the chief executive
officer of the Billings, Montana-based group, said in a statement.

     Overseas shipments of U.S. beef fell to 434 million pounds in 2004 from a record 2.5 billion pounds in 2003. Exports will climb to 1.52 billion pounds in 2008, up 18 percent from an estimated 1.28 billion for this year, the USDA said May 11.

     Canadian cattle and beef exports dropped to C$1.9 billion ($1.6 billion) in 2004, from C$3.9 billion in 2002, according to Statistics Canada.

     The National Cattlemen's Beef Association said 18 countries still ban U.S. beef while an additional 86 have partial restrictions.

`Extremely Patient'

     ``We have been extremely patient and these continued embargoes must be lifted,'' Gregg Doud, the association's chief economist, said in a statement.

     The OIE noted that the U.S. and Canada are not free of mad cow disease, making them ineligible for the ``negligible'' risk designation. The body offers three ratings for mad-cow risk, the lowest being ``undetermined.''

     Canada confirmed its most recent BSE case on May 2, four months after the U.S. said it planned to lift most of the remaining import restrictions on beef and cattle from its northern neighbor. The U.S. said cattle from Canada pose ``minimal risk'' for spreading mad-cow disease.

     Cattle futures for August delivery fell 0.825 cent, or 0.9 percent, to 92.575 cents a pound today on the Chicago Mercantile Exchange. The price is up 20 percent from a year ago.

--With reporting by Alexandre Deslongchamps in Ottawa. Editor: Enoch

To contact the reporters on this story: Daniel J. Goldstein in Washington at +1-202-624-1863 or dgoldstein1@bloomberg.net;

Alan Bjerga in Washington at +1-202-624-1857 or abjerga@bloomberg.net.

To contact the editor responsible for this story:
Steve Stroth at +1-312-443-5931 or sstroth@bloomberg.net.

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