U.S. BEEF BUCKS FOR RESUMING WORLD TRADE 2004-03-08 (1)

ROBERT VOSBURGH

WASHINGTON -- The lower beef prices enjoyed by U.S. consumers in recent weeks may soon be on their way back up, as barriers limiting both imports of Canadian cattle and beef products and U.S. exports to countries like Mexico begin falling.

The re-opening of international markets will reduce the stateside glut of beef that has been building since the country's first official case of bovine spongiform encephalopathy was announced Dec. 23, 2003. The subsequent export bans by heavy beef-buying countries like Japan and Mexico caused domestic retail prices to drop a substantial 5.6% from December to January, during the height of the scare, according to tracking statistics compiled by the Boulder, Colo.-based National Cattlemen's Beef Association.

Only strong domestic demand saved the market from collapsing, analysts have said.

After the U.S. Department of Agriculture closed its field investigation Feb. 9 without uncovering additional cases, the beef industry has been waging a campaign against the Bush administration and government regulators to begin scaling back import bans and aggressively pursuing reticent export countries.

"The value of our live cattle is about $15 per hundredweight, or about 18% less than if [all] our export markets were open," Gregg Doud, NCBA's chief economist, told SN last week.

"The problem we've been running into is that with the loss of these export markets, we are not able to market a significant quantity of that carcass."

As a result, processors have idled production lines and temporarily laid off workers. It's anticipated that the re-opening of the world market to U.S. beef and cattle will reverse the slide, thin the supply, and boost domestic wholesale and retail prices.

The American Meat Institute, Arlington, Va., most recently called on the USDA to act decisively to restore the international market: first by completely lifting controls that have been severely limiting imports from Canada after that country reported its own case of BSE last May.

No new cases have been reported in either country, and AMI officials said it's time to resume full-scale trading now that all investigations are completed. The USDA began allowing limited imports last summer of specific cuts from Canada, but has not acted since.

"We strongly believe that the time for incremental half-measures ... has long since passed," the trade group stated in its letter to the USDA.

AMI officials also avowed that lifting the ban would aid in the restoration of the U.S. export market, which suffered a total shutdown following the first stateside BSE case last December. Canada represents 10% of the United States' total export market. Mexico imports nearly 25% of U.S. beef each year, while Japan takes 36%.

"Until the United States exhibits leadership by reopening the Canadian border to cattle and beef and beef products in a manner that conforms with [international] standards, it is unrealistic to expect that other countries will afford any similar access opportunities for American ranchers and processors," the letter continued.

During a subsequent media conference call, AMI's president, J. Patrick Boyle, said full restoration of trade with Canada was an essential precondition for the U.S. cattle and beef industry to regain reciprocal market access within North America and to other major foreign markets.

"If Washington, D.C., won't adopt reasonable trading standards between minimal-risk countries for BSE, how in the world can we persuade Tokyo and Mexico City and Seoul and other foreign governments to do the right thing?" Boyle asked.

Against this backdrop, a small processor in Arkansas City, Kan., is seeking to begin testing all cattle it processes for BSE -- a step that Japan has sought for all U.S. product as a prerequisite for trade resumption.

However, the idea has met with resistance from U.S. producers, who argue the test is redundant and undermines the comprehensive safety nets the United States already has in place to protect the cattle supply against BSE.

The company, Creekstone Farms, will enter a legal grey zone should it pursue testing on its own since the tests haven't been approved for use by the USDA, which prohibits the sale of unevaluated test kits.

As part of the approval process, the tests would have to be evaluated for efficacy -- and for their impact on regulations and trade, agency officials were quoted as saying.

Industry groups like AMI are also upset that the processor is breaking from the pack and is in danger of cracking the wall of solidity the beef industry has presented to consumers in the face of the BSE scare. AMI officials said any testing program should be administered under the guidance of the USDA.