Newswise — The U.S. beef industry probably lost from $3.2 billion to $4.7 billion during 2004 after Japan and South Korea banned imports of the product following discovery of a BSE case in the U.S. South Korea has since lifted its ban and may begin importing again this fall.
Japan lifted its ban briefly in late 2005 before reinstating it when a small quantity of banned material was found in a shipment. In June, Japan and the U.S. reached agreement to resume U.S. beef exports pending completion of a Japanese audit of American beef safety. Projections indicate that even when all imports are restored, it will take a few more years for the beef industry to return to pre-2004 market levels.
"It looks right now like it will linger on," said Sean Fox, a Kansas State University agricultural economics associate professor who researched the situation for the Food Safety Consortium. "Even if we hadn't had this latest episode with Japan where they've reinstituted the ban, we were probably looking at regaining one-third, maximum, of that market compared to what we had there in 2003. To get back to where we were in 2003, we're probably looking at two to four years."
Japan had been the largest importer of U.S. beef and South Korea was the third largest importer until December 2003, when both countries suspended beef imports after a dairy cow in Washington state tested positive for BSE.
In December 2005, Japan agreed to resume the imports after the U.S. Department of Agriculture lifted a ban against importing whole boneless cuts of beef from Japan. Japan also imposed several specific restrictions governing any U.S. beef imported into its country.
The resumption was scuttled shortly. A month later, Japan halted imports when a shipment possibly contained material at risk for BSE.
Things worked better with South Korea. In January it announced resumption of beef imports from the U.S. by agreeing to allow calves under 30 months old into the country but excluding beef ribs.
Fox's KSU study found that prior to the embargo, Japan had accounted for 35 percent of the beef export market's value and South Korea had contributed to 21 percent of the value. The loss of the export markets led to increased domestic supplies and reduced prices.
The study also noted that average U.S. wholesale boxed beef prices during 2004 were 12 to 17 cents per pound lower than they would have been if the Asian export markets hadn't been closed.
Domestic beef demand held up well in the U.S. after the first reports in December 2003 of the BSE case, Fox said, despite initial fears that there might be significant reduction of demand. "The main economic impact of BSE was a consequence of export reductions and costs of new regulations on the beef industry," he said.
Proposals that the government should allow companies to test cattle voluntarily for BSE as a way of regaining access to export markets have been controversial. The KSU research indicated that it would have cost $640 million to test all slaughtered cattle in the U.S. in 2004. It also noted that the cost would equal the revenue gain that the U.S. would realize it if got back 25 percent of the Japan and South Korea markets.
"Recapturing the market is going to remove the incentive for voluntary testing," Fox said. "There are some firms that would do it if they had the authority to do it, but it doesn't look like USDA is going to allow that." Testing is probably not a "magic bullet," Fox continued, especially if tests don't turn out to be 100 percent accurate and a quantity of banned material slips into some exported beef.
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