business news in context, analysis with attitude

The US Department of Agriculture (USDA) confirmed late yesterday that a single, "presumptive" case of bovine spongiform encephalopathy (BSE), more popularly known as mad cow disease, has been identified in Washington State.

A confirmed case of mad cow disease has never been found in the United States. The disease has been widespread in Europe and has been linked to about 130 human deaths.

According to USDA Secretary Ann Veneman, "A single Holstein cow from Washington State was tested as presumptive positive for BSE or what is widely known as mad cow disease," Veneman told reporters. "Even though the risk to human health is minimal, based on evidence, we will take all appropriate actions out of an abundance of caution," she said.

"USDA will take the actions in accordance with its BSE response plan, which was developed with considerable input from federal, state and industry stakeholders," she said.

As of this posting, these actions reportedly include a voluntary recall of meat products that may have been tainted by the infected cow, which could amount to tens of thousands of pounds of beef. The only thing delaying this move is that it taking time to determine how much meat may be involved.

USDA reportedly has quarantined a farm near Mabton, about 40 miles southeast of Yakima, where the cow was tested. USDA also says that the cow was processed at Midway Meats in Centralia, Washington, but that the meat from the cow has not entered the food supply.

The herd at the farm where the cow was found reportedly is being destroyed. Officials are tracing the movement of the cow from the farm to the slaughterhouse, and the flow of the meat to three processing plants in Washington.

Veneman emphasized that the incident is not believed to be terrorist-related.

The USDA said that the diseased animal was originally tested for mad cow disease on December 9. Positive results were obtained on December 22 and retested yesterday. A tissue sample from the cow now reportedly has been flown via military jet to a UK laboratory for final confirmation.

International Impact

Beyond the impact on the US meat industry, there already is evidence of an impact beyond US shores. The US reportedly supplies about 25 percent of the beef consumed by the entire world, and is a $3 billion-plus industry. Within hours of the USDA announcement, Japan, South Korea, Singapore, Taiwan and Malaysia all took action to halt imports of US beef. By this morning, Australia, South Africa, Thailand, and Hong Kong joined in halting US beef imports.

Japan is the biggest export market for US beef, but that nation's Agriculture Ministry said the country was indefinitely banning beef imports. In Seoul, the South Korean government halted customs inspection of US beef, a move that effectively keeps US beef from reaching Korean stores and restaurants.

And, here in the US, shares of McDonald's, the fast food hamburger chain, dropped to $24.20 in after-hours trading from their close of $25.28 on the New York Stock Exchange after the news broke Tuesday evening - even though McDonald's executives said the company did not do business with the implicated meat processor. It is expected that fast feeders like McDonald's could be dramatically affected in the public markets, and that there also could be a negative impact on major supermarket chains such as Kroger, Safeway and Albertsons.

The Canadian Example

It was just seven months ago, on May 20, that Canada confirmed that one Alberta cow, which was slaughtered in January, had mad cow disease - an announcement that resulted in the immediate halt of Canadian meat exports by most countries, including the US, which has still not opened its borders completely to Canadian beef.

The Seattle Times reports this morning that "a private study released in November estimated Canada's beef industry lost about $2.5 billion (U.S.) in the six months after the country's first and only mad-cow case was discovered at a farm near Wanham, Alberta." According to the report, "Canadian farmers sold 20 percent less cattle in the first nine months of 2003 than in the same period the year earlier."

J. Patrick Boyle, president of the American Meat Institute (AMI), said,
"USDA's aggressive animal disease surveillance system worked as it should to detect a single presumptive case of BSE in the United States. This case poses no risk to consumers because as [Secretary] Veneman noted, the infectious BSE agent in not found in the beef we eat, such as steaks, roasts and ground beef. This is an animal disease challenge -- not a food safety problem."

Underwhelming Testing?

One report said that while there are 100 million head of cattle in the US, there are 19,000 tests for mad cow disease performed each year.

The New York Times reports this morning that "in a survey conducted in 2002 by the Agriculture Department, products for 34 processing plants that use such machinery, known as an advanced meat recovery system, were tested and 35 percent of them tested positive for central nervous system tissue."

According to a report in the Seattle Times, scientists think the disease can be transmitted to people "through contaminated beef, especially parts of the central-nervous system such as the brain. They think it is caused by an abnormal prion, a cellular protein, which folds incorrectly in the cells. There is no evidence of transmission through person-to-person contact. Some animal studies suggest the protein could be transmitted by blood, but this has never been shown in humans, according to the National Institute of Neurological Disorders and Stroke. No known cases of the disease, in cows or humans, have occurred in the United States."

Also according to the Times, when people contract BSE, "it causes the brain to become filled with holes that resemble sponges under a microscope. The disease is one of several called spongiform encephalopathy. Early symptoms include psychiatric or sensory problems. Muscle coordination deteriorates in weeks to months, and muscle jerking and severe dementia occur late in the illness. Death may take several years, but the disease is invariably fatal."

According to published reports, while authorities are unable to trace every steak, roast or package of hamburger that is in the nation's supermarkets to their precise origin, they can be tracked to packing plants, feedlots and farms - though sometimes only to a group of entities.

In this particular case, the specificity of the farm and processing plant is viewed as being a positive in the prevention of widespread panic. MNB spoke with Robert Hermanns, CEO of Associated Wholesale Grocers of Seattle, who told us that his company has been able to determine that it has not received any meat from Midway, and that none of its independent stores have done business with the company.

In what no doubt was designed to be the ultimate reassurance to the public, USDA Secretary Veneman said, "We see no reason for people to alter their eating habits. I plan to serve beef for my Christmas dinner."
KC's View:
This is a nightmare, though hardly the worst nightmare that has been concerning the nation's food industry. The worst nightmare is a broader scale outbreak of mad cow disease, which likely would undermine in some fundamental way the faith that people have in the food supply.

This is not to say that the impact of this story can be underestimated.

The mad cow story broke late yesterday afternoon, and we were watching CNN last night at 6 p.m. By 6:05, the anchor was interviewing John Stauber, co-author of Mad Cow U.S.A.: Could The Nightmare Happen Here?.

Stauber, who clearly has a fair amount of hostility for the US food industry, used his moments on the airwaves to say that USDA Secretary Veneman was "really underplaying the significance of this event," that the US "has not taken sufficient measures to deal with this disease," that his presumption is that "there are many more cases" of mad cow spread throughout the country," and that this is "an extremely dangerous situation." Stauber went on to say that Veneman has no credibility on the issue because she used to be a cattle industry lobbyist - and so, by extension, government statements on this issue are not to be trusted.

Well, we don't know if Stauber is correct, or if he's a nut. Or something in between. (To be honest, we couldn't even find out what Veneman did before she got into government work - there seemed to be no mention of her private industry experience on websites that we checked last night.)

But he isn’t alone. In a story this morning, United Press International reports that while USDA insists that America's beef supply is safe, "the agency for six months repeatedly refused to release its tests for mad cow to United Press International. The USDA claims to have tested approximately 20,000 cows for the disease in 2002 and 2003, but has been unable to provide any documentation in support of this to UPI, which first requested the information in July.

"In addition, former USDA veterinarians tell UPI they have long suspected the disease was in U.S herds and there are probably additional infected animals."

And MSNBC was reporting this morning that there are concerns that there is affected hamburger in US supermarkets - though it did not get any more specific than that.

Persistent Questions

Certainly questions remain. How did the cow contract mad cow disease? Did parts of the cow go to rendering plants to be turned into feed that was then fed to other cows? And if so, where are those cows and are they being tested?

We suspect that before this is over, the recall of possibly or potentially infected beef will run in the hundreds of thousands of pounds, perhaps millions of pounds. And that temporary bans on US beef will be wide scale, setting back the US economy at a time when things were beginning to get rolling again.

This isn’t just us being pessimistic. You can just see the storm clouds forming.

Just as important as dealing with the realities of possibly tainted beef, government and industry will have to deal with the perception issue. Because right or wrong, Stauber and people like him will find the bully pulpit. And that has to be dealt with.

In virtually every one of the dozens of newspapers we've reviewed over the past few hours, mad cow disease has been a story given prominent play. It was on the evening news programs produced by all the broadcast and cable networks. Nightline tossed out its previously planned topic for the night and devoted the entire program to mad cow disease.

Beyond that, we have a nation that is meat-crazed these days because of the popularity of the Atkins low-carb diet and its brethren, which have helped raise cattle prices by 30 percent this year. Suddenly, there may be those who make other choices because of the mad cow scare.

Ironically, the Chicago Tribune had two stories on the subject of meat today. One had the headline: First Suspected U.S. Mad Cow Case Found. The other's headline: Diet fads fatten ranchers' wallets.

Maybe not so much.

Silver Lining?

The good news (if it can be described that way) is that this news of mad cow disease comes at a time when there is a lot of competition for the nation's attention. Two nights before Christmas, there probably are fewer people watching CNN, and there likely is less usage of newspapers on Christmas Eve than on other, more ordinary days. So that may give government and industry just a little bit of breathing room. But not much, we'd guess.

It is critical that the food industry approach these new circumstances with candor and forthright honesty. There is no room for vacillation and avoidance. Be up front about the dangers and implications of mad cow disease, and about the precautions being taken by retailers and manufacturers to prevent such occurrences.

Actually, this kind of aggressive information program probably should have been in place for a long time; if so, there'd be fewer concerns right now. But it isn't too late, even if there is little room for error.

To give you an idea of what's out there now, Caroline Smith DeWaal, director of food safety for the Center for Science in the Public Interest, told The New York Times that consumers should "avoid ground beef unless they grind it themselves from a whole piece of muscle meat," "avoid brains, beef cheeks, neck bones," "avoid any meat that comes from the head and any meat that is taken from close to spinal column or containing bone that is part of the spinal cord, like T-bone, which was banned in some European countries during the outbreak in Britain," and "avoid pizza toppings, taco fillings, hot dogs, salami, bologna and other products that contain not only ground beef but beef from machinery that squeezes out bits of meat that cling to the spinal column and other bones."

We read all that, and we just figure that contrary to what Secretary Veneman said about her Christmas dinner, we're just as glad to be serving turkey.