040107 Beef Demand In U.S. Strong Despite Scare

Cattle futures in the United States rose yesterday for the first time since the first mad cow scare in the U.S., after early signs the threat has not cut into consumer demand for beef.

The price of cattle for February delivery rose 0.37% to US73.8 cents a pound. That was the first daily gain since Dec. 23, when a cow infected with bovine spongiform encephalaphy, or BSE, was found on a dairy farm in Washington state.

The price rebound follows a report by Cattle-Fax, a Denver-based market researcher, that says U.S. beef sales have remained strong all week.

"All early indications suggest that U.S. consumers remain confident in the safety and wholesomeness of U.S. beef supply," a Cattle-Fax report said.

The U.S. consumer situation appears to mirror the pattern set in Canada after an animal with BSE or mad cow was found in Saskatchewan last May. Beef prices plummeted. Canadians took advantage of the price cuts and bought 52% more beef last July and August than they did the year before.

"We're the only country in the world that's ever had a case of BSE and saw consumption rise," said Kelly Daynard, spokeswoman for the Canadian Cattlemen's Association.

Keith Bollman, an analyst with Topco Associations LLC, which buys meat for 2,000 grocery stores, said U.S. consumer demand hasn't changed.

"From the reports I've seen and heard from our retailers, they are moving through the inventories at the same rate as they would normally move."

Wendy's International Inc., the third-largest U.S. hamburger-restaurant chain, said sales last weekend were unaffected by the news about mad cow.

This is all great news for the U.S. industry. The U.S. is the world's largest beef exporter, but the bulk of the industry is built on domestic consumer demand.

George W. Bush, the U.S. President, said the government will take all necessary measures to halt the spread of mad cow disease. He encouraged Americans to continue eating beef. "I ate beef today and I will continue to eat beef," Bush told reporters yesterday at his Texas ranch.

The U.S. Department of Agriculture (USDA) has banned meat from cows that were too sick or injured to walk before they were butchered.

More than 30 jurisdictions, including Japan, Mexico and South Korea, closing their borders to U.S. beef.

The U.S. industry is well situated to survive those bans, since only 10% of its total annual beef output of US$27-billion is exported

Canada, by contrast, was hard hit by its mad cow scare. Canada sells 70% of its $5.7-billion in annual beef production abroad. The surge in domestic Canadian demand was not enough to make up for lost exports. Canadian farmers lost $1.9-billion after markets overseas banned beef.

The U.S. beef industry still faces some uncertainty. Welcome though it was yesterday, the thin gain pales in comparison to the 19% drop in cattle futures that has taken place since Dec. 23.

Officials from the U.S. Department of Agriculture are still hunting for up to 70 cows that were part of a herd exported to Washington state from Alberta in September, 2001.

Ten animals from that herd have been found, said Ron DeHaven, chief veterinary officer with the USDA.

Meanwhile, the Canadian Food Inspection Agency in Ottawa is running genetic tests to confirm whether the infected U.S. cow came from a Canadian herd. Results will be ready next week.

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