Cattle Today

Cattle Today

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by: Wes Ishmael

Here we go again.

The ballyhooed and imminent resumption of trade between the U.S. and Japan--predicted to happen within a matter of months, ever since a single case of Bovine Spongiform Encephalopathy (BSE) was discovered in a Canadian-born cow residing in Washington 10 months ago--is presumably ready to take flight.

"This is welcome news for U.S. cattlemen and for the U.S. economy," explained Jan Lyons, president of the National Cattlemen's Beef Association (NCBA) October 23, following USDA's announcement that U.S. and Japanese trade officials had come to terms on how to go about resuming beef trade between the two countries.

"It's an important first step toward regaining full access to the largest export market for U.S. beef, and it serves as a gateway for worldwide resumption of U.S. beef exports," said Lyons.

While the announcement is welcome--time will tell when trade actually resumes--one of the most significant outcomes of the negotiations may be that the two countries supposedly agreed that any future discovery of BSE should not disrupt trade between the two countries.

"Both the United States and Japan have agreed that their respective food safety systems are sufficiently robust to assure that the potential of additional cases (BSE) in either country will not interrupt future trade," explained Phil Seng, president and CEO of the U.S. Meat Export Federation."

More Questions Than Answers

"I am extremely pleased that our trade officials in Tokyo today were able to conclude an agreement with Japanese officials that paves the way for a resumption of beef trade," announced Agriculture Secretary Ann Veneman.

"...Based on the joint statement issued in Tokyo, the agreement appears to allow the United States to export beef and beef products from cattle under 20 months of age to Japan, based on production record age verification on an interim basis," says Seng. "Longer term, the United States will study other methods of accurately determining age, and with Japanese agreement, can move to alternate age determination methods (more later)."

Understand, what some are touting as a breakthrough is basically agreeing to agree on how to resume trade, rather than opening the doors to immediate trade.

The USMEF emphasizes the agreement is an important first step in resuming bi-lateral beef trade between the two countries, but significant work remains to be done.

According to USDA, a special marketing program will be developed for Japan under which the Agricultural Marketing Service will certify that exported products meet the terms of the agreement. The foundation of it will be the Beef Export Verification (BEV) program.

Terms of the agreement supposedly include:

•      Eligible beef and beef products must come from cattle verified to be 20 months of age or younger (more later).

 •     Specified Risk Materials (SRMs) must be removed from animals of all ages.

•      Necessary modifications to U.S. and Japanese regulations must be completed. In Japan, domestic approval includes deliberation by its Food Safety Commission.

•      Continued joint scientific consultations between the two countries, with the inclusion of international experts from the World Organization for Animal Health (OIE) and the World Health Organization (WHO).

On the flip-side, both countries have agreed to allow Japan to resume exporting beef products to the United States--basically Wagyu or Kobe beef--which accounted for about $250,000 in 2001, according to USDA.

"Japan has requested to resume it's sales to our market," says USDA. "And, without pre-judging the results of any evaluation, we have indicated we will commence our rule-making process (that would allow it). This will entail a risk assessment by the Animal and Plant Health Inspection Service and the Food Safety Inspection Service, including inspection of Japanese processing facilities, among other considerations."

Japan was the leading export of U.S. beef and beef products on a value basis before the discovery of BSE in the United States closed international doors to American beef exports.

For perspective, according to Gregg Doud, NCBA chief economist, beef exports to Japan were worth about $1.4 billion in 2003, in part because many of the products exported to Japan fetch higher prices than they do here at home. Historically, about one-third of U.S. beef exports have gone to Japan. What's more USDA estimates approximately 70 percent of the 35 million cattle harvested in the U.S. annually are steers and heifers 20 months old or younger.

In the 10 months since exports were closed, though, other nations have imported more to Japan, so it will take some time for the U.S. to regain the market share it had.

The Problem With Age

According to USDA, two methods will be used to determine and verify animal age:

•      Bovine animals included in the special marketing program to Japan must be traceable to live animal production records indicating the animals are 20 months of age or younger at the time of harvest.

Production records with birth dates include records for individual animals, records from insemination, group age verification plans and records from already existing USDA-certified special plans.

•      The USDA physiological grading system will also be used. A special study is being conducted to examine the correlation between chronological age and physiological characteristics. This information will then be used to define the parameters of the USDA grading criteria that will be used in determining animal eligibility for export.

When the carcass grading system objectively demonstrates that it can verify physiological age to evaluate carcasses to be 20 months of age or younger, it will be used as a method to satisfy compliance.

USDA committed to completing this study and issuing a report within 45 days, which would make it the first week of December. In the meantime, USDA was set to host a workshop November 3 to explain to packers how to verify age during the interim.


How Soon-How Much?

"The agreement reached in Tokyo will enable our beef trade to resume under a special marketing program. We (U.S. and Japan) then will review the program after six months of operation, with a view toward returning to more normal trade patterns," said Veneman.

In other words, when beef exports to Japan will resume is anybody's guess.

First, both countries must complete the regulatory process for revising domestic regulations, and promulgate the regulations necessary to allow resumed trade of beef products under the agreed terms. Never mind having much idea how long this will take Japan, it's questionable how quickly the U.S. can proceed on the heels of the presidential election and presumably some turnover in the staff at federal agencies.

Second is the special study correlating age to physiological characteristics that must be completed, then agreed upon by both sides--that's 45 days at best.

Whenever it comes about, the immediate economic impact to cow-calf producers is also questionable. According to NCBA, previous annual exports to Japan amounted to about $12/cwt on feeder cattle prices. But, other than a potential momentary boost in the market based on emotion, it's doubtful that market fundamentals will allow feeder cattle and calf prices to charge ahead.

Moreover, even with full access to the Japanese market, it will take time for the U.S. to recover market share lost to other beef exporting companies during the past 10 months. And, that's not a given. A variety of polls conducted in Japan recently suggested that a majority of consumers there aren't anxious to begin buying U.S. beef again.

So, the main economic impact to cow-calf producers may come on the cost side. Depending on what age production records are required, in lieu of an eligibility qualification system on the packer chain, stockers may have to invest more in determining where calves come from and obtain age verification from the source of origin.

As the details sort themselves out, USDA plans to use the Japanese agreement as a demonstration to use in negotiations with South Korea, another major importer of U.S. beef that closed its doors to America in the wake of BSE being discovered here. As well, the U.S.-Japan agreement has prompted Taiwan to agree in principle to resuming trade with the U.S.

Again, folks are agreeing to agree, which is a whole lot like deciding to become a rancher rather than actually becoming one.


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