For most member states, beef production and consumption projections for 1996 have been cut, and only a modest rebound is forecast for 1997. A sharp drop in EU beef consumption, more than that for beef production, has led to sharply higher public and private beef stocks. Looming over world meat markets, these stocks are forecast at nearly 1.05 million tons on January 1, 1997, more than double those at the start of 1996. EU public intervention stocks are projected to reach 600,000-700,000 tons (product-weight basis) by year's end.
Initial epidemiologic studies, begun in 1987, concluded that the cause may lie in the feeding of ruminant derived meat and bone meal. The same data also suggested that BSE may have been caused by feeding cattle rendered protein produced from the carcasses of scrapie-infected sheep. Based on the recommendation of the scientific community, the British government made BSE a notifiable disease and instituted a ban on the use of ruminant offal in ruminant feed, in July 1988. The latter prompted an investigation into the methods used to render animal by-products. When this investigation determined that the causative agent for BSE could survive existing rendering practices, additional measures were taken to improve and refine the heating process for meat and bone meal, including a ban on the use of specified bovine offals (SBO) in ruminant feeds in 1989.
In 1990, the British government established the Spongiform Encephalopathy Advisory Committee (SEAC), consisting of experts from outside the British government specializing in neurology, epidemiology, and microbiology. The committee's goal was to provide scientifically based advice on the implications for animal and human health in regard to TSE. In addition, the SEAC began anew active epidemiologic surveillance of Creutzfeldt-Jakob Disease (CJD), the human equivalent of BSE, with the specific goal of detecting possible changes in the epidemiological features of the disease. CJD typically manifests itself in people in their mid-to-late 60's and is characterized by loss of motor control, dementia, paralysis, wasting and eventually death, typically following pneumonia. Rarely does anyone survive for more than one year after initial diagnosis.
On March 20, 1996, the SEAC advised the British government that the committee had become concerned about 10 cases of CJD, discovered between early 1994 and late 1995. The committee's concern was based on the following: (1) the individuals were younger than normal, ranging in age from late teens to early 40's; (2) differences in neurological functions appeared distinguishable from those previously identified; and (3) a review of the new patients' medical histories, genetic analysis, and consideration of other possible causes of CJD did not explain these cases satisfactorily. The committee concluded that there remains no direct scientific evidence of a link between BSE and CJD. However, based on current data and in the absence of any credible alternative, the committee concluded that the most likely explanation was that these cases were linked to exposure to BSE before the introduction of control measures, in particular, the specified bovine offal ban in 1989.
Prior to the SBO ban, the EC banned the export of UK cattle born before 7/18/88 and offspring of affected or suspect animals. However, since 1989, BSE has occurred in other countries, the first case being discovered in Oman, in cattle imported from the UK. Denmark, France, and Switzerland have also reported cases of BSE in imported cattle, with the largest outbreak occurring in Switzerland. Although the number of cases have not reached the proportions found in the UK, BSE has been found outside the major epidemic area.
The conclusions presented to the British government by the SEAC prompted the announcement made by the British Health Secretary, on March 20, 1996. His speech before the House of Commons sent shockwaves throughout the world when he announced that there may exist a link between BSE and an apparent new strain of CJD. Media reaction to this news was widespread and at times hysterical causing beef purchases and consumption to plummet. Although there were earlier scares, none had the devastating effect of the recent one.
Reaction to the possibility of a link between BSE and CJD resulted in an immediate ban on the exportation of British beef and beef products by EU member states. Numerous countries followed suit, while several countries reassured its consumers that the importation of British beef had been banned since the late 80's as a result of the original BSE scare. The official EU ban on exports of UK beef and beef products became effective March 26, 1996, following consultations with the EU Standing Veterinary Committee. By the end of the first full week, 25 plus countries had banned British beef and beef products. The EU ban was further extended to include live animals, genetic material, and all rendered products.
Many proposals for eradication were put forward, including one to de-populate the entire British herd, estimated at 11.6 million head in 1996. This proposal was viewed as too costly, and unjustifiable from a scientific perspective. Final consensus for an eradication program was finalized by the UK and EU member states in May 1996. The eradication program incorporates measures taken against BSE in the UK since 1988 and those recently introduced. New measures for the eradication of BSE are as follows:
These measures go beyond those previously provided by EU rules and are intended to ensure
no cross-contamination of cattle feed is possible. As an additional measure, the remains of
slaughtered animals must be stained and incinerated. The total number of cattle expected to be
slaughtered under this scheme are 1.7 million head.
Under the auspices of the Florence Agreement, concluded by EU Heads of State, additional measures were agreed upon for the step-by-step lifting of the British beef export ban:
The selective slaughter scheme was recommended by the Standing Veterinary Committee as an additional measure for restoring consumer confidence and the linchpin to the agreement, calling for the cull of an additional 147,000 head. However, this key part of the agreement is not likely to be implemented due to continued resistance among members of the UK parliament. Other recent developments, including the publication of a research article in "Nature" magazine on the lack of effectiveness the selective cull will have on eradication of BSE, have forced the UK government to step back and re-examine the situation. The article's authors have predicted that BSE will die out on its own by 2001 and that the additional slaughter of 147,000 cattle will not largely affect an earlier elimination of the disease. To date, 600,000 animals have been slaughtered under the 30-month scheme, with the total expected to reach almost 1 million in the first year of operation.
Funding for the BSE eradication program, shared by the EU and the UK, will be 70 percent and 30 percent, respectively. BSE has been very expensive, with the final cost not expected to be known or paid for before the end of the century. The total cost known thus far for the respective industries is as follows: (1) rendering - $181 million; (2) dairy and cattle producers - $1.03 billion; and (3) slaughterhouses and cutting plants - $166 million.
Formal proposals are expected to be made later this year for reforming the EU beef sector. These reforms are aimed at reducing Community beef production 11 percent by the year 2000, by taking 858,000 head of cattle out of production each year. Five areas are to be reformed:
Research on this dreadful disease and its human counterpart continue at a fever pitch. Scientists are racing each other to discover a way to diagnose BSE and CJD, in an effort to prevent any future outbreaks. Recently, U.S. researchers at the California Institute of Technology and the National Institutes of Health announced the first reliable test to detect these diseases. The findings, published in the New England Journal of Medicine, are based on the discovery of a protein in cattle, humans, and other animals that suffer from the related fatal brain disorders. As the disease is currently diagnosed by postmortem inspection, the new test, if confirmed, will allow doctors and veterinarians to test for CJD and BSE in cases where clinical symptoms are present.
The effect on consumption was greatest in April, immediately following the U.K. government announcement, when consumption dropped 40-50 percent in some member states. The sharpest decline in consumption occurred in Italy (down 30-40 percent), where beef imports (including those from other member states) account for 20-25 percent of the total beef supply. Consumption has increased from these very low levels more recently. French beef consumption has experienced a relatively strong recovery, in part because of the introduction of the "Viande Bovine Francaise" marketing program.
Graph: BSE's Effect On EU Beef Prices
The EU is expected to be burdened with larger beef supplies in 1997, despite introduced governmental intervention measures. Next year, EU beef production is forecast at 7.43 million tons, up 1.5 percent from 1996. A 10-percent increase in Italian production is the primary reason for this increase as Italian cattle imports increase sharply. For most member states, marginally larger beef supplies are estimated. Among the largest EU producers only Germany is projected to realize a production decline, a reduction of roughly 4 percent.
Market returns for beef in the European Union have deteriorated precipitously, despite expanded intervention and slaughter programs. The EU reference price for beef dropped 13 percent from late-March to mid-August. Large price declines occurred in major beef producing member states. During this period, the reference beef prices in France, Germany, and the United Kingdom fell 16 percent, 11 percent, and 17 percent, respectively.
Despite these reduced prices, the size of the EU cattle inventory is expected to remain stable this year and next. The January 1, 1997 EU cattle herd is estimated at 83.2 million head, nearly unchanged from the start of 1995 and 1996. Among major cattle producers, the German and U.K. cattle inventories on January 1, 1997 are forecast to decline 1 percent and 2 percent to 15.7 million head and 11.35 million head, respectively, from the beginning of 1996. The French herd is expected to increase less than 1 percent to 20.8 million head. In both Germany and the United Kingdom, dairy quotas are contributing to a decline in the dairy cattle inventory. The U.K. government has also introduced measures to accelerate slaughter of local cattle. Meanwhile, in France, cattle are being held off the market as a result of the BSE crisis, resulting in a lower slaughter rates and inventory expansion.
The EU is expected to draw down growing beef stock levels through stepped up exports. In 1997, EU beef exports are forecast at 676,000 tons, up almost 100,000 tons from the 1996 figure. Among major markets, the Russian Federation and other countries of the former Soviet Union are projected to expand purchases of EU beef next year. That said, it will be difficult for the EU to reduce stocks without breaching its Uruguay Round export subsidy commitments.
The impact of the BSE crisis goes well beyond the beef sector, affecting the entire livestock industry to differing degrees. Among the most directly affected are two of the rendering industry's most important products: meat and bone meal, and tallow and grease. The BSE crisis has had a direct and immediate impact on the markets and regulatory environment for meat and bone meal, while the impact on tallow has been less immediate, affecting the future of one of the industry's most important export markets.
Meat and bone meal are primarily used as high-protein additives in animal feed. Following the first BSE crisis in the late 1980s, the use of specified, high risk' ruminant offal in ruminant feed was banned in the U.K. and other countries. Swine and poultry feed were unaffected, since neither species is affected by BSE or any related disease.
In the panic that has followed the most recent scare, prices for meat and bone meal have plummeted, and producers in the U.K. and Ireland have been unable to sell their product. In Ireland the situation became so severe that renderers threatened to shut down operations, since there was no possibility of selling meat and bone meal under the existing conditions. Through all of this, EU feed manufacturers have continued to support use of ruminant-derived proteins in swine and poultry feed. Continued availability of this market may help to stabilize the meat and bone meal market in the long-term.
Despite the fact that BSE has never been reported in the United States, the scare has spread even there. Since the crisis began, domestic prices for meat and bone meal have fallen roughly $45 per metric ton. In April, one of the largest poultry producers in the U.S. announced that it would no longer purchase ruminant protein for use in feed rations--this in spite of the fact that poultry has never been known to be affected by BSE or any related disease. Other producers have followed suit. Ironically, export markets for U.S. meat and bone meal remain unaffected by the scare.
In response to the crisis, the U.S. Food and Drug Administration has raised the possibility of a ruminant-to-ruminant feed ban in the United States. The future of such a ban is uncertain. Estimates of the cost vary widely: a study by the National Renderers Association (NRA) lists outcomes with costs that range from $289 million to $1.6 billion, depending on how the ban is implemented. This does not take into account such secondary effects as the increased cost of feed as demand for alternative protein sources (mostly soybeans) climbs.
The effects of the BSE scare on tallow markets are less clear than for meat and bone meal. Tallow is a processed and purified animal fat produced from beef and sheep offal and trimmings during the rendering process. While meat and bone meal are used primarily as feed supplements, tallow has a much wider array of uses, including high-energy feed supplements, soap, and a variety of industrial uses, including paints and cosmetics. In the United States and the EU, it is used primarily as a feed additive--the use that is most directly affected by BSE.
The most immediate impact of the crisis on tallow markets has been felt in the U.K., where the EU's ban on exports of livestock products has caused a rapid accumulation of stocks. This has been partly offset by a drastic (35 percent) drop in production resulting from the U.K.'s BSE cattle cull scheme, which requires many of the carcasses to be destroyed entirely.
Throughout the rest of the EU, the effect has been quite different. One byproduct of the scare has been a shift in overall consumption from beef to pork and poultry. Production of swine and poultry makes heavier use of concentrated mixed feed than cattle production, and increased use of mixed feed concentrates requires greater use of tallow as a feed supplement. On the other hand, BSE concerns have reduced the use of tallow in ruminant feed, causing consumption in some countries to decline to the benefit of oilseed producers.
The primary concern for U.S. exporters regards the EU's regulatory response to the crisis. Among the proposals forwarded to deal with the crisis has been a change in the way that all mammalian waste is processed, requiring an increase in the time/temperature of processing. The proposal will, in effect, require all processors not using the 'super cooker' (133 degrees centigrade at 3 bars for 20 minutes) technology currently in use in Germany to modify their equipment to match this standard. This standard would be extended to imports as well. At present, rendered fats such as tallow are excluded, though meat and bone meal are not.
The final outcome of BSE and its impact on beef production, consumption, and rendering will not be known for sometime. Many adjustments have been made thus far by the EU and individual member states in a final attempt to rid themselves of this dreaded disease and its suspected link to CJD. Expectations for an increase in consumer confidence and beef consumption are dependent upon the measures put forward by the governments involved. Many of the changes that have been made and the proposals yet to come, will have a lasting affect on everyone involved.
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Last modified:Friday, 22-Nov-1996