For more than two years now, Market To Market has tracked the Japanese beef dispute through the experiences of one U.S. beef packer, Creekstone Farms. Creekstone is a small processor that relies heavily on overseas markets like Japan. To that end, Creekstone was prepared to test 100 percent of its cattle for Mad Cow disease, one of Japan's early demands for re-opening its market to U.S. beef. But USDA said "No," saying 100 percent testing was unnecessary. No doubt, USDA fears that allowing one processor to do universal testing would set a costly precedent for the entire U.S. beef industry. Well, in the best American tradition, the disagreement ended in court when Creekstone sued USDA for the right to do universal testing. David Miller picks up the story.
Prior to Japan's initial ban on U.S. beef imports in 2003, Creekstone Farms was approached by their Japanese customers about testing all of the cattle processed at the Arkansas City, Kansas, plant for mad cow disease. Creekstone agreed. In early 2004, they asked the United States Department of Agriculture for permission to conduct the tests. USDA officials said no and proposed Creekstone could test all cattle bound for Japan over 30 months of age -- the age USDA scientists have determined the disease presents itself. Creekstone said no and repeated its request for permission to test for mad cow. Again, USDA denied the petition and threatened Creekstone with legal action if any attempt was made to purchase testing supplies.
Blocked by the U.S. government, Creekstone CEO John Stewart could only watch as his company's share of a marketplace valued at $1.4 billion annually slipped away. More than 100 of Creekstone's 750 employees lost their jobs in the first few months of 2004.
John Stewart, Creekstone Farms: "Back in December of '03 when we got the B-S-E word we waited a month or two because we thought USDA was going to move quickly and get this trade resumed and we were gonna be back to business and what we called normal operations. Didn't happen; it kept dragging and dragging.
Over time Creekstone has managed to reemploy more than half of the people that were initially laid off by cultivating new markets in Europe and Latin America. Despite the new sales territory the owners still wanted to regain a portion of the lucrative Japanese market.
After being closed for almost two years, the Japanese opened their borders briefly to U.S. beef in December of 2005. In late January of this year a few pieces of spinal column were found in a small shipment from New York and the Japanese, again, closed their borders.
Negotiations began as before but this time Creekstone Farms sued the USDA for the right to purchase the mad cow testing supplies.
John Stewart, Creekstone Farms: "We'd like to collect for damages, that's not part of our suit and I don't think there's ever been a precedent set where a company can sue the government and collect damages like that...our real objective here is to get the markets open. Let's get trade resumed, number one, let's get B-S-E testing underway because that's gonna give us huge paybacks down the road in many ways."
When and if Japan officially opens its borders, Stewart is ready to go with sales to the Japanese. But even with contracts in place he is concerned about the uphill climb that U.S. beef producers currently face.
John Stewart, Creekstone Farms: "It's been almost three years, we've lost market share to the Australians, they're very smart people and they've spent a lot of money so we're gonna have to deal with that problem. Being able to BSE test is a very intelligent way to protect us in the future if we have a BSE problem here in the US and it is also a way to build confidence with the consumers there so we can recapture that market share much quicker but it's gonna take time."
Besides the loss of market share, a recent series of Japanese government sponsored listening sessions revealed that Japanese consumers are still concerned about the safety of U.S. beef.
On Monday of next week, after making a previous agreement with USDA, Creekstone will file for a summary judgment with the United States District Court. The move is intended to speed up a decision on the suit. Once accepted by the court, both sides will have 45 days to file legal briefs in defense of their case.
Officials at USDA would not comment on the pending litigation. However, they did tell Market to Market that testing for mad cow is a surveillance tool and not a food safety test. Since June of 2004 the USDA has tested more than 740 thousand head of cattle and determined the risk of finding mad cow is less than one case per million.
Despite promises by Japanese officials to reopen the borders after packing plants are given yet another clean bill of health, Stewart is not planning to drop the lawsuit as long as the issue of 100 percent testing for mad cow remains unresolved.
For Market to Market, I'm David Miller.