December 5, 2005

How old is that US beef? Japan wants to know

By Bob Burgdorfer

CHICAGO (Reuters) - Stan Isaacson can look at the cattle in
his sprawling Texas feedlot and estimate each animal's age
fairly accurately.

That skill has served him well in managing his cattle, but
it will not be enough if he and other cattle producers intend
to ship beef to Japan when that market reopens, perhaps as soon
as late this month.

Japan and other countries banned U.S. beef two years ago
after the U.S. reported its first case of mad cow disease.

When trading resumes, producers and beef plants must
document that beef shipped to Japan came from cattle 20 months
of age or younger. This will mean a paper trail that tracks
cattle from birth to the slaughterhouse and beyond.

"They are making this so complicated, so difficult,"
Isaacson said in a telephone interview. "They are trying to
create such a bookkeeping nightmare."

Cattle 20 months or younger are believed to be safe from
the disease.

Formally known as bovine spongiform encephalopathy (BSE),
mad cow disease is a fatal brain condition in cattle. Since
December 2003, there have been two cases in the United States.
Scientists believe people can contract a similar fatal disease
by eating certain beef parts from an infected animal.

Before the bans, Japan was the top overseas market for U.S.
beef, buying about $1.4 billion worth or a little more than a
third of all U.S. beef exported in 2003.

That is why the cattle industry and the U.S. government
have worked hard to get that business back. Deals were made
regarding the handling and documenting of the beef to ensure it
is free of the disease.


The U.S. government set up an Export Verification Program
and participation is required for producers and beef plants
intending to do business with Japan. It will involve training
and increased record keeping.

John Lawrence, agricultural economist at Iowa State
University, has been advising producers on how to comply with
the new rules, which he said could add to production costs but
also net higher prices for cattle that meet the requirements.

"There is going to be a change in the way we do business,"
said Lawrence. "I think it will speed us toward a voluntary
national animal ID system."

Getting Japan's business back was a priority not only
because it was the leading buyer, but it is assumed that other
countries will follow Japan's lead. One country may be South
Korea, which had been a key buyer of U.S. beef before the mad
cow discovery.

"Before the bans, exports accounted for about $15 per
hundredweight (100 lbs) in the price of the animal," said Greg
Doud, chief economist for the National Cattlemen's Beef
Association. "We have $5 of that back with Mexico and Canada.
We have $10 to go. Japan is about $5 of that $10."

Beef cattle currently sell for about $1,150 per head, or
$92 per 100 lbs.


The NCBA estimates 50 to 60 feedlots are set up to serve
the Japanese. But economists and industry leaders believe the
first beef shipments to Japan will be small because not many
cattle have the necessary documentation.

"I think there will be a photo opportunity yet this year. I
don't think there will be an economically significant quantity
until sometime in 2006," said Jim Robb, economist at the
Livestock Marketing Information Center.

A Japanese food panel this fall ruled that U.S. beef would
be deemed safe if certain materials that could transmit the
disease were removed. A public comment period in Japan recently
concluded, and once the comments are evaluated U.S. officials
expect trading to resume.

As more cattle qualify for Japan, the premium paid for
those cattle should decrease, analysts said.

And as beef sales to Japan increase, U.S. consumers may pay
more for beef.

"If we start exporting beef to Japan, it would reduce the
supply here. All things being equal, you would expect higher
prices at the store," said Lawrence.

But it will be a slow process, according to the U.S. Meat
Export Federation.

"We are projecting it will take about four years to fully
recover that market," said Lynn Heinze, spokesman for the

U.S. cattle prices have bounded higher recently in futures
trading at the Chicago Mercantile Exchange, with some of those
gains attributed to anticipation of renewed sales to Japan.

However, the price increases may have been excessive
relative to the expected small volume of beef that will be
involved in the early shipments, analysts said.

"I would say maybe 25 percent of the rally in the past
couple of weeks has been due to the anticipation of Japan,"
said Rich Nelson, analyst with Allendale Inc.

CME December live cattle futures closed Monday at 92.850
cents per lb, which is equivalent to $92.850 per 100 lbs. Two
weeks ago the price was 90.325 cents.