Beijing store
Ng Han Guan  /  AP
A Chinese store clerk arranges domestic beef at a supermarket in Beijing on Thursday. China banned U.S. beef imports amid fears of mad cow disease.
updated 12/25/2003 8:55:48 PM ET 2003-12-26T01:55:48

Beef futures trading effectively stopped on the Chicago Mercantile Exchange because no one was buying, restaurant stocks dropped, and several countries suspended beef imports from the United States.

In other countries where mad cow has appeared, panicked consumers shunned beef and sent a financial shock for years throughout the food industry from farms and slaughterhouses to grocery stores.

Still, many people said the problem could be limited if consumers see it as an isolated incident. Don Rogers of Forsyth, Ill., said he wasn’t worried.

“If you buy a good quality meat from a quality store, you don’t have anything to worry about anyway,” he said. Rogers was drinking a cup of coffee at a McDonald’s, which is the largest purchaser of beef in the nation, before heading off to buy steaks for a Christmas Eve dinner.

McDonald’s Corp. was one of the companies that took an early hit from the news, with its stock dropping $1.32 to close at $23.96 in a short trading session Wednesday on the New York Stock Exchange. Rival Wendy’s was off $1.87, or 4.7 percent, to $37.79, while Outback Steakhouse Inc. fell 5 percent, or $2.23, to close at $42.40.

McDonald’s said in a statement that the infected cow had no connection to its beef supply and that its food was safe.

“I think the primary issue for McDonald’s is consumer perception,” said Carl Sibilski, a stock analyst with Morningstar. He said the company has very stringent standards for its beef.

Joe Kadow, a senior vice president for Outback Steakhouse, said the company serves only beef from grain-fed cows, so infected brain or spinal tissue would not be used as feed for cows slaughtered for the chain’s restaurants.

Spokesmen for Burger King and Wendy’s, the nation’s second- and third-largest fast-food chains, also said they had safeguards in place.

Denny Lynch, a spokesman for Dublin, Ohio-based Wendy’s International, said the U.S. Department of Agriculture’s safety standards  are effective.

“Tuesday’s incident proves the system works. We applaud what the government is doing,” he said.

Major Market Indices

Sen. Dick Durbin, D-Ill., who has made beef safety an issue for years, also credited federal officials for their quick response but said the nation needs even stricter regulations to keep its food safe.

“This is one of those moments when the government has to step in as quickly as possible and as credibly as possible to restore confidence,” he said.

U.S. Agriculture Secretary Ann Veneman said parts of the animal, from a farm near Yakima, Wash., went to three processing plants in Washington, but she added that there was little danger to the food supply because muscle cuts of meat “have almost no risk.”

Mad cow disease, known also as bovine spongiform encephalopathy, eats holes in the brains of cattle. A human illness, Creutzfeldt-Jakob disease, is related to mad cow disease, and doctors believe humans contract it from eating meat containing infected tissue.

The discovery comes amid a boom time for the U.S. beef industry, which had been buoyed by the popularity of high-protein diets like the Atkins diet, along with a surge in exports to countries that banned Canadian beef after mad cow was found there.

The country’s largest meat processors, including Tyson Foods Inc., rushed to distance themselves from the suspect cow herd in Washington state.

Agriculture and meat industry officials say potentially diseased parts of the animal — namely the brain and spinal tissue — are removed before they enter the human food supply.

“This is an animal disease challenge — not a food safety problem,” Arkansas-based Tyson said in a statement.

Video: Beef industry weighs mad cow case Despite the reassurances, there was no question that beef had a sudden image problem.

At the Chicago Mercantile Exchange, there was no interest in beef futures contracts, which fell the market limit of 1.5 cents, or 150 points.

“There’s nobody willing to buy a contract,” said Chuck Levitt of Alaron Trading Corp. “This is not going to stop until the contract has lost probably a thousand points.”

With daily limits on how far prices can drop, Levitt said he thinks it will be next week before there is demand for beef futures contracts.

Credit rating agency Standard & Poor’s announced it was placing all U.S. beef protein processors on its CreditWatch list and revising its outlook for several restaurant chains to negative.

Analyst Tobias Lefkovich of Smith Barney issued a report noting the ripple effect could extend beyond the stock of meat companies, restaurants and grocery chains, and hit shares in farm equipment companies and chemical companies that are large producers of fertilizer.

“Where we go from here is really the critical next step,” Nebraska Cattlemen spokesman Greg Ruehle said. “Right now, perspective is the main thing. We need to ensure consumer confidence in U.S. beef.”

At the Kinzie Chop House in Chicago, general manager Stephen Fish said he doubted one isolated report of the disease would cause a mass change in eating habits.

“We’ve been talking about fat and how it kills people every year, and it hasn’t made us a thinner nation,” he said.

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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