Joe Raedle  /  Getty Images file
Despite lingering concerns about the discovery of a U.S. cow infected with mad cow disease, Americans remain eager to enjoy their favorite meat.
By Jon Bonné
msnbc.com
updated 1/13/2004 5:05:05 PM ET 2004-01-13T22:05:05

Nothing, it appears, comes between Americans and their beef.

With a couple weeks gone since mad cow disease appeared in the United States — just one case in one old cow, we were told incessantly — retailers have yet to see customers shun their favorite meat. McDonald’s, America's biggest beef buyer, continues to report “strong sales.”

Fears of shrinking sales have largely not come true, perhaps due to the industry’s biggest and most coordinated PR effort ever. Little seems likely to change the way Americans buy beef. The revolution will not be on the plate.

“I think the market has a fair amount of comfort with the system we have here,” says Ron Gustafson, the beef guru at the U.S. Department of Agriculture’s Economic Research Service.

The beef industry gets a lot of credit for consumers’ big shrug. Along with government officials, it sought to minimize the finding Dec. 23 of a single Holstein cow in Washington state infected with bovine spongiform encephalopathy.

Their overriding message: Beef is safe, always has been, always will be. USDA chief veterinarian Ron DeHaven described new federal policies to close inspection loopholes as “adjustments and further enhancements” to a system widely acknowledged as one of the more failsafe in the world.

Critics also saw their chance to make a point. Some of the USDA’s Dec. 30 changes, they noted, had been vigorously fought by the industry and defeated on Capitol Hill despite significant support from dozens of lawmakers.

Many Americans found themselves on a steep learning curve about beef. Terms formerly relegated to the fringes of food policy became commonplace: downer cows, specified risk materials, advanced meat recovery. Mad cow concerns brought U.S. shoppers closer to their counterparts overseas, who have weighed these concerns for years.

“Consumers are learning things they never wanted to know,” says Caroline Smith DeWaal, food safety director at the non-profit Center for Science in the Public Interest, which focuses on nutrition issues.

Lessons from elsewhere
In that sense, the U.S. market could grow more similar to Europe’s or Japan’s, where cattle have more stringent testing and feeding standards. Japan runs a BSE test on every cow killed for food. Europe essentially prohibits animal proteins in feed for livestock meant to be eaten.

Their prices are higher, too. European producers earn 16 percent more than U.S. producers for their beef carcasses, according to OECD data. (The British industry still lags, though.) While a pound of sirloin costs about $6 in American supermarkets, French shoppers pay nearly $7.50 for a similar bit of boeuf; many in Britain pay over $8. The Japanese pay more than $15. Those who handle meat also earn more: British butchers are paid nearly 50 percent higher wages than their U.S. counterparts; German butchers’ wages are even higher, according to the National Bureau of Economic Research.

Of course, the British and Japanese eat well under 20 pounds of beef per person a year, compared to about 65 pounds for Americans. Britain’s mad-cow chaos in the 1980s and ‘90s helps account for its smaller portions, and provides valuable lessons on how markets react to mad cow fears.

The British beef industry was hammered soon after the first human cases of mad cow disease were found there in March 1996. Sales dropped over 30 percent. But in the next few months, researchers found frequent consumers continued to eat; it was the disappearance of occasional beef eaters that killed sales.

Moreover, shoppers got choosy. Muscle meats sold well, but no one wanted ground products, especially with news reports continuously noting they were more likely to contain contaminated bits of nerve and brain. New labeling was quickly developed that guaranteed ground meat was made from younger cows and was “offal free.” Government inspectors could test any package on a shelf.

“If we were ever going to get the show back on the road again we needed to do something with that minced beef,” says Duncan Sinclair, senior economic analyst for Britain’s Meat and Livestock Commission.

Sales volumes recovered within 18 months, but prices lagged. Producers who lost much of their herds were compensated by the government but hesitated to increase their production. Consumers wanted only high-quality meats. The entire industry shrank.

Assuming more ailing cows don’t turn up in the U.S. food chain, similar scenarios seem unlikely here.  But University of Nottingham economist Tim Lloyd, who edits Britain’s Journal of Agricultural Economics, sees one big similarity in the two countries’ response: officials’ unwavering denials about health risks. It was a huge mistake for the British government.

“Nobody really believed them. History has shown that that’s probably not the strategy to adopt,” he says. “If confidence goes, then it takes an awful long time to regain that.”

A unique industry
Of course, the beef industry has grown more globalized since then. U.S. producers regularly grind other countries’ leaner grass-fed beef together with fattier bits from U.S. cows.

Seeing the global trend, U.S. ranchers — banking on patriotism and what had been a BSE-free herd — demanded country-of-origin labeling, which Congress approved in 2002. Ironically, the industry retrenched once it saw a multibillion-dollar price tag, but may get stuck with the labels anyway. As for the price tag on the new rules, the USDA will pick up much of it and likely will pay farmers for cows that must be destroyed.

Americans, meantime, are accustomed to a very unique kind of beef.

The U.S. herd has one of the shortest lifespans in the world, a result of post-World War II techniques that helped U.S. cattle grow at a stunning pace. An American steer lives a brief life: 15 to 20 months, while its counterparts in New Zealand or Argentina live years longer as they grow to an ample kill weight. U.S. ranchers slashed that turnaround time using rich feed and centralized feedlots that concentrate cattle near major slaughterhouses.

The shortened lifespan actually protected much of the U.S. herd from perhaps the biggest mad cow concern: increased risks in cattle older than 30 months, which are the most likely to show signs of BSE.

But there’s a downside.  Cattle diets often use feed made from animal protein.  In 1997, the Food and Drug Administration banned cattle feed containing protein from cows or other ruminants. (That sort of cross-feeding spread BSE through Britain.) Yet other livestock can eat it, and their protein can be fed back to cows. Even many retailers want tougher feed restrictions.

At the same time, downers have often been put into the food chain with reluctance. Ranchers facing razor-thin profit margins didn’t want to lose money, but the practice unnerved many industry old-timers.

“In a way the industry shot itself in the foot,” said DeWaal, the food activist. “The U.S. industry has been pushing a product on us and then saying it’s the only product we’ll buy.”

But even if those details -- too arcane for most people before Dec. 23 -- have gotten new scrutiny, do U.S. consumers care?

In fact, we were already changing our beef habits.

Better meat at home
A smaller herd, combined with beef’s resurgent popularity among Atkinsized, protein-hungry Americans, sent U.S. retail prices to a record $3.39 a pound last October, up 14 percent in a year. High-end cuts did even better; the cost of a T-bone was up over 30 percent. Farmers reaped profits from a well-managed demand curve.

Even before that, beef — good beef, at least — wasn’t cheap. Beginning in the 1950s, as incomes went up and households spent a smaller percentage on food, beef was positioned as an affordable luxury, a special treat. It was what was for dinner.

When per-capita consumption fell from a 1970s peak of nearly 100 pounds a year, the industry reinforced its message, convinced money could be made in quality rather than volume.

Unfortunately, the real BSE concerns lay elsewhere — in hamburger, sausages and processed products that, unlike a steak or roast, can be made from virtually any part of the cow, including those near neural tissue, where prions are usually found.

Meat curtailed by the new USDA rules often ended up in these products. Old dairy cows and the 200,000 or so downers in the U.S. food chain weren’t carved up for prime steaks; they were chopped into low-grade bulk meat. However, many big beef buyers — the McDonald’s and Burger Kings of the world, even USDA’s own school lunch program — have for years spurned downers and other low-end sources.

The beef industry, currently eager to please, could face additional pressure to dump its second-rate products. But many lower-income Americans have little option but to buy the cheap stuff.

That said, a lot of expensive cuts could get cheaper, at least in the short term. High-end meat made up most of the $2.7 billion in beef the United States exported last year — revenue that dried up after the mad-cow find. With over 30 countries barring American beef from their borders, the industry is desperate for solutions.

Farmers can breed one new calf every nine months; they can’t easily grow or shrink their herds. With the bans, lots of meat is going to be left over. It can’t just sit in a warehouse while a trade fight ensues, but it can be sold domestically.

With beef prices forecast to drop some 15 percent, shoppers who served London broil may upgrade to filet mignon. But that doesn’t mean good beef is going to lose its luxury status.

“You’re still not going to see steak, good cuts of steak, selling at prices lower than pork chops,” says Chris Hurt, a Purdue University agricultural economist.

Other options
For other consumers, growing niche markets in beef provide a dizzying array of options— everything from organic feed to the sort of lean, grass-fed product found overseas.

But again, the industry doesn’t turn on a dime. Specialty beef accounts for just a tiny fraction of sales; organic meat takes up perhaps 1 percent of the overall market. Though Katherine DiMatteo, executive director of the Organic Trade Association, sees growth in organic beef, she warns that supplies will inevitably be limited. Farmers need years to convert operations to organic standards.

Rather, she suggests, some ranchers may use the mad-cow moment to seek out higher margins in niche markets like natural or free-range beef that have higher standards but don’t require the lengthy certification process required under 2002 regulations.

“You’re going to have more farmers with smaller herds,” DiMatteo says. “I don’t think there’s this kind of clinging to the way things are. Ultimately people want to be successful and have a good livelihood.”

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