Cattle Rebound From Biggest Drop in 10 Months on Mad Cow

April 25 (Bloomberg) -- Bloomberg's Sheila Dharmarajan reports that Cattle futures rebounded as Japan, the European Union and Taiwan said they wouldn’t alter import controls on U.S. beef even after a case of mad-cow disease was reported in California, the first in six years. She speaks on Bloomberg Television's "Inside Track." (Source: Bloomberg)

Cattle futures rebounded from a nine-month low as countries from Canada to Japan said they’ll continue to import American beef after the U.S. reported its first case of mad cow disease in six years.

Canada, Mexico, Japan and South Korea, the four biggest buyers of U.S. beef last year, said they won’t halt purchases after the disease, known as bovine spongiform encephalopathy, was found in a dairy cow in central California. No meat from the animal entered the human food chain, John Clifford, the U.S. Department of Agriculture’s chief veterinarian, said yesterday.

U.S. beef exports at a record 2.79 billion pounds (1.27 million metric tons) in 2011 had just returned to levels achieved before the first BSE case in the U.S., discovered in December 2003, USDA data show. Exports tumbled from 2.52 billion pounds in 2003, the previous all-time high, to just 460.3 million in 2004, as countries including Japan, China and Taiwan put restrictions in place. Last year, shipments were worth a record $5.42 billion, according to data from the U.S. Meat Export Federation, a trade group.

Futures rebounded today as “the emotion of this scare is being relieved,” Paul Georgy, the president of brokerage Allendale Inc., said by telephone from McHenry, Illinois. “Countries like Mexico, Japan and South Korea have said that they will not halt imports, although South Korea said they were going to step up checks.”

Photographer: Daniel Acker/Bloomberg

Beef cattle run toward an open pen in Malta, Illinois, U.S. South Korea will halt customs clearance of any new U.S. beef imports. Close

Beef cattle run toward an open pen in Malta, Illinois, U.S. South Korea will halt... Read More

Close
Open
Photographer: Daniel Acker/Bloomberg

Beef cattle run toward an open pen in Malta, Illinois, U.S. South Korea will halt customs clearance of any new U.S. beef imports.

Live-cattle futures for June delivery climbed 0.6 percent to settle at $1.12275 a pound by 1 p.m. on the Chicago Mercantile Exchange. The price yesterday tumbled the exchange’s 3-cent limit to settle at $1.11575, the lowest for a most-active contract since July 1. The commodity has dropped 15 percent since reaching a record $1.315 on Feb. 22.

Fourth Case

This is the fourth confirmed case of the brain-wasting disease in the U.S. cattle herd since the first discovery in December 2003, in an animal that came from Canada.

The North American country bought $1.03 billion in U.S. beef last year, according to the U.S. Meat Export Federation. Canada has had 19 cases as of February 2011, according to the Centers for Disease Control and Prevention.

U.S. trade with its northern neighbor “will not be impacted” by the BSE finding, Canada’s Agriculture Minister Gerry Ritz said today in an e-mailed statement. The Agriculture Ministry in Mexico, the second biggest buyer, said it expects its cattle trade with the U.S. to remain unchanged.

Japan won’t suspend imports because shipments are made under a framework that assumes the disease isn’t eradicated, Minoru Yamamoto, director at the farm ministry’s international animal health affairs office, said today. Before yesterday’s discovery, the health ministry was planning to relax the import restriction after getting approval from the nation’s Food Safety Commission, Hideshi Michino , director at the ministry’s import food safety office, said on April 11.

Japanese Restrictions

Japan restricts U.S. beef imports to cattle 20-months-old or younger as older animals are at higher risk of having the disease. The regulation was put in place before the Asian country resumed purchases in 2005 of American beef, which had been banned after of the first case was discovered in the U.S. Taiwan now allows beef imports from cattle younger than 30- months-old.

Price Rebound

“The rebound came as major Asian buyers, including Japan, said they were not taking any measures against U.S. beef imports,” said Toshimitsu Kawanabe, an analyst at broker Central Shoji Co. “This may not last long as consumers in those importing nations will shy away from U.S. beef on food safety concerns and seek other origins, such as Australian beef.”

South Korea, the fourth-largest buyer of U.S. beef, may strengthen quarantine inspections of the meat, Lee Byoung Guan, deputy director for planning and coordination at the Animal Plant & Fisheries Quarantine & Inspection Agency, said by phone today. Customs clearance of shipments hasn’t been halted, he said. Earlier today, Park Sang Ho, an official at South Korea’s farm ministry, said inspections would be suspended. He wasn’t available on his office or mobile phone later in the day.

Taiwan doesn’t plan to change existing rules, said Tai Yu- yen, chief secretary of the Council of Agriculture. European Union spokesman Frederic Vincent said the EU plans no measures in response to the case.

California Plant

Baker Commodities Inc. said the case was at its Hanford deadstock plant, where dead livestock are held before going to a rendering plant. The animal arrived at the plant April 18 and all test samples are sent to the University of California at Davis, the company said.

The finding shows surveillance is working, which should give confidence to trading partners, according to the United Nations’ Food & Agriculture Organization. The case shouldn’t have implications for the U.S. status of “controlled risk” for BSE, the World Organisation for Animal Health said.

U.S. beef is “very safe” and “firewalls” put in place ensure that there are no health concerns, Joel Haggard, Asia- Pacific vice president of the U.S. Meat Export Federation, said in an interview with Bloomberg Television.

The news came “at the very tail-end of what is a major downward correction,” Dennis Smith, a senior account executive at Archer Financial Services in Chicago, said in a phone interview. Prices have fallen 7.3 percent this year.

The cow that tested positive for mad cow “didn’t come anywhere near the food chain,” Troy Vetterkind, the owner of Vetterkind Cattle Brokerage, said in a phone interview from Chicago yesterday. “The government, the USDA, their inspection service did their job. It’s a non-event in my opinion.”

Quarantine Strengthened

South Korea’s government should immediately halt imports of U.S. beef, the Hanwoo Association, which represents local cattle breeders, said in a statement on its website.

“It’s a political economy story. It’s not a public health story,” Daniel Pinkston, an analyst at the International Crisis Group, said today. “Farmers and livestock ranchers in South Korea have political clout, political influence.”

Seoul-based Harim Co. (136480), a maker of canned chicken breasts and nuggets, rose 3.2 percent and Seoul-based Dong Won Fisheries Co. (030720), a deep-sea fishing company, gained 15 percent in trading in the city on speculation demand for poultry and seafood will increase. Tokyo-based Yoshinoya Holdings Co., a Japanese beef- bowl chain, fell as much as 3.7 percent, the most in a year in trading there.

In 2003, after the first case of the disease, dozens of countries shut their doors to U.S. shipments. Losses to livestock producers and meatpackers ranged from $2.5 billion to $3.1 billion annually from 2004 through 2007, according to the International Trade Commission. Nations including China have maintained some restrictions ever since.

To contact the reporters on this story: Jae Hur in Tokyo at jhur1@bloomberg.net; Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net;

To contact the reporter on this story: Whitney McFerron in London.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.