THE EFFECTS OF THE BSE OUTBREAK IN THE UNITED STATES ON THE BEEF AND CATTLE INDUSTRY

On December 23, 2003, Bovine Spongiform Encephalopathy (BSE), widely known as 'mad cow disease,' was found in the state of Washington. Major beef importing countries, including Japan, South Korea, and Mexico, banned imports of beef and beef products produced in the United States. A single case of BSE occurred on May 20, 2003, in Canada, prompting the United States to close its border to Canadian beef products. Prior to these BSE outbreaks in North America, the disease was detected in the United Kingdom and Japan. U.S. consumer response to the BSE outbreak in Washington is unknown. However, the previous cases which occurred in the United Kingdom and Japan indicate that the BSE outbreaks reduced domestic consumption of beef produced in the countries and increased beef imports from BSE-free countries, suggesting that consumers in the United States may respond negatively to the BSE outbreak and reduce their consumption of beef. Based on consumer response to BSE outbreaks in the United Kingdom and Japan, the BSE outbreak in Washington could reduce domestic consumption by 10% and exports by 75%, which could decrease the price of beef about 15%, from 370cents/lb in the third quarter of 2003 to 313.7cents/lb. However, prices of pork and chicken would increase about 3%, as consumers in this country switch from beef to pork and chicken consumption. The decreased consumption and export of beef will affect prices of slaughter and feeder cattle accordingly. The price of slaughter cattle would decrease about 13.5%, and the price of feeder cattle would decrease about 16% in the United States. If there are additional BSE outbreaks in the United States, the impacts will be much more significant. Domestic consumption of beef could decrease more than 20%, and U.S. exports would shutdown completely. In this case, the domestic price of beef could decrease 26%. Prices of slaughter and feeder cattle would decrease accordingly, about 20.9% and 24.5%, respectively, which could destroy the U.S. beef and cattle industry. To isolate a future BSE outbreak in the region, it is important to improve traceability of the infected animals by introducing both country of origin and regional labeling and preserve it through the supply chain. If the labeling system is developed for the United States, and if U.S. processors could segregate cattle based on its origin by labeling, the impacts of BSE outbreaks on the U.S. beef/cattle industry could be less prominent. Labeling would allow U.S. and foreign consumers to distinguish beef coming from BSE-free regions in the United States