U.S. negotiators will be back in Tokyo soon to try and broker a deal that would ease Japan's insistence on 100 percent testing of cattle for Mad Cow disease. Japan has blocked imports of U.S. beef since a single case of Mad Cow was found in the States last December. Japan says 100 percent testing is needed to prevent contaminated beef from entering the human food chain. The U.S. says such blanket testing is unnecessary.
The turmoil caused by Mad Cow is troubling on a number of fronts; not the least of which is: How much testing for the disease is enough? And, more to the point, who pays for that testing?
Some in the beef cattle industry side with USDA in saying that 100 percent testing is unnecessary. On the flip side of that argument are businesses like Creekstone Farms. The Kansas meatpacker lost its lucrative Japanese market after the U.S. Mad Cow discovery and now wants it back. But can the embattled beef industry and the U.S. government make it happen? David Miller reports.
MTM 2951/ Creekstone Farms
On May 5, 2003, after more than $5 million in renovations, Creekstone Farms opened the doors to its state-of-the-art processing facility in Arkansas City, Kansas.
In the beginning, 795 employees worked five days a week processing 1000 head per day. But on December 23rd, 2003, all that changed. A single case of Bovine Spongiform Encephalopathy, or Mad Cow disease, was discovered in Washington State. Business with Japan, which made up 20 percent of Creekstone's revenue, was cutoff, processing days were reduced from five or six to four or five, and 50 employees lost their jobs.
Bill Fielding, COO, Creekstone Farms: "Well, I probably can't tell you my exact reaction on television as to what our reaction has been. But it was of great concern."
Bill Fielding is the Chief Operating Officer for Creekstone Farms.
Bill Fielding is the Chief Operating Officer for Creekstone Farms.
Bill Fielding, COO, Creekstone Farms: "So, our reaction when it happened is okay, it's happened now, how can we manage it better, how can we respond to our customer, how can we make sure we don't lose that market for any longer than what was necessary."
Creekstone Farms was ready. The company already had discussed testing for BSE with its Japanese customers before December 23rd. In February, $500 thousand in upgrades were started in the on-site testing lab. The renovations would allow Creekstone to use a USDA approved quick-test kit. The test kits would give an indication of a possible positive or negative in seven hours. As work began, Creekstone submitted its request to USDA for permission to purchase and use the test kits. In March, the staff began training.
Even though the USDA's instructions had been followed to the letter, Creekstone's request was denied on April 8th. The company could only watch as 20 percent of its $300 million annual revenue slipped away. Plans to increase Japanese sales to 28 percent were put on hold and the potential revenue losses of $200,000 per day began to mount.
When this story was first broadcast in May, the USDA declined to be interviewed on camera after repeated requests by Market to Market. At the time, USDA officials stated they were focusing on trade issues between the Japanese and US governments and had "moved on" in regards to Creekstone Farms. Furthermore, the USDA continues to claim there is no scientific justification for 100 percent testing because the disease does not appear in younger animals. The USDA did make a counteroffer to Creekstone Farms where the government would test all of its animals over 30 months of age. Creekstone refused the offer.
Bill Fielding, COO, Creekstone Farms: "...their idea of a compromise was that we could test one to two percent of our animals, not 50%, which a normal compromise would be sort of 50/50; one percent. &they worry about misleading consumers and on labeling issues and everything else where you don't want to misrepresent something. To say that is a compromise is insulting and just plain wrong. "
The National Cattlemen's Beef Association, which represents an estimated 230,000 breeders, producers, and feeders, has sided with the federal government. Gregg Doud is Chief Economist for the NCBA.
Gregg Doud, Chief Economist, NCBA: "We're not in favor of testing every animal for BSE because it's analogous to testing kindergartners for Alzheimer's disease, you're not going to find it. This disease is not prevalent in animals under 30 months of age. International body of science on that is very clear."
Additionally, the NCBA believes initial negotiations should be between governments not businesses and governments. NCBA further believes the cattle producer will ultimately will pay for the test, that 100 percent testing is not scientifically justified, and claims a false positive would have a devastating effect on the market. So far, the two false positive results from late June and early July have had only a temporary negative effect on the price of cattle.
The American Meat Institute, an industry trade organization which represents 95 percent of the nation's meat and poultry processors, also does not believe 100 percent testing of animals younger than 30 months is warranted. Jim Hodges is AMI's president.
Jim Hodges, President, AMI Foundation: "... the USDA made that kind of clear statement when they denied the request for private testing because when you say BSE tested it infers something about the product, that there was a negative test result but that negative test result in the context of testing young animals where it is so remote that you'll never find the disease, it really is somewhat misleading to make that claim of BSE tested."
On June 1st, the USDA began a testing protocol where a maximum of 268,000 animals will be examined over the next 16 months. Each test is projected to cost $325 per head. The NCBA and AMI expect private industry to be able to cut costs to roughly $30 per head. Creekstone has calculated the amount to be an even lower $20 per head.
Creekstone believes all the arguments have different answers. Their Japanese customers have agreed to pay for the tests, but Fielding believes the cost can be recovered through sales of specialty meats to foreign markets, or from consumers willing to spend a few extra pennies per pound.
To prevent unnecessary fallout from a false positive, Creekstone's protocol requires that meat from every animal be held for 24 hours. If there is a presumptive positive, a more precise test could be conducted to determine if the meat should be kept or destroyed.
One of Fielding's overriding concerns centers on the loss of valuable Japanese market share to other countries. In a recent trip to Japan, Fielding took this picture of an Australian beef industry representative handing out free samples.
The Sellers Feedlot is located about 150 miles north of Arkansas City in Lyons, Kansas. About half of the 10,000 head from this operation are sold to Creekstone Farms. Steve Sellers, the owner, is a fourth generation cattleman and has been an NCBA member since 1962. Sellers believes requests by the customer should be honored.
Steve Sellers, Owner, Sellers Feedlot: "We don't need it, we don't need the extra expense, the product is safe but the customer wants it and demands it and I think we have not really been real sensitive to their needs. They've had BSE in their country and they're probably much more aware of it, as a consumer, than we are. And I think it's fairly natural that they would want it."
Current speculation places the opening of the Japanese market sometime in early January of 2005.
Creekstone sent a letter to the USDA requesting a reversal of its decision but has yet to receive an answer. The company is still considering taking legal action against the government.
Bill Fielding, COO, Creekstone Farms: "I really questioned whether we would survive up until today and the, I think we will survive. I more than think, I know we will survive. And we're a little bit like a little animal that's been put in the corner and we'll fight ten times what our size is.
For Market to Market, I'm David Miller.