Frustration follows Japan's ban on U.S. beef

Issue Date: January 25, 2006

By Kate Campbell
Assistant Editor

With the announcement that Japan will once again stop imports of U.S. beef, California cattle and beef producers find themselves caught mid-stream--cattle are on their way to market, product is in the pipeline and the outcome of the Japanese government's decision is unknown at this time. Experts say whether U.S. beef producers are looking at a financial disaster or merely a trade blip remains to be seen, but it's clear cattle ranchers are facing uncertainty and frustration.

Japanese Prime Minister Junichiro Koizumi said beef shipments into his nation were being halted because a 1,000-pound shipment of veal from a packing and processing house in New York is said to contain banned tissue considered a risk for transmitting bovine spongiform encephalopathy (BSE).

Koizumi said having to stop accepting U.S. exports of beef is a "pity, given that imports had just resumed."

Japan partially lifted a two-year ban on beef imports last month. Last week Singapore announced it would reopen its market to U.S. beef, and South Korea and Hong Kong have already made that decision.

In 2003, the United States exported $5.9 million in beef and beef products to Singapore, with boneless beef exports accounting for nearly $4 million. That same year, the United States exported $815 million in beef to South Korea and another $90 million to Hong Kong.

That ban on U.S. beef imports was imposed by Japan and other nations in 2003 after a single case of BSE was discovered in the United States. Until then, Japan had been the top overseas market for U.S. beef, worth nearly $1.5 billion a year.

Japan's agriculture minister, Shoichi Nakagawa, said parts of cattle backbones, banned under the carefully negotiated agreement to resume trading with U.S. beef producers, were found in the veal shipment.

The agreement allowing U.S. and Canadian beef back into Japan stipulates that meat come only from cattle aged 20 months or younger. It excludes meat containing spines, brains, bone marrow and other cattle parts considered a high risk for BSE.

"We take this matter very seriously and we are conducting a thorough investigation," said U.S. Agriculture Secretary Mike Johanns. "While this is not a food-safety issue, this is an unacceptable failure on our part to meet the requirements of our agreement with Japan.

"We take this matter seriously, recognizing the importance of our beef export market, and we are acting swiftly and firmly."

Johanns said he has talked with Japanese Ambassador to the United States Ryozo Kato and "expressed our regret and informed him of our actions. I also offered to provide, in writing, an outline of our actions and the results of our investigation into this matter.

"Our agreement with Japan is to export beef with no vertebral column, and we have failed to meet the terms of that agreement. I am dispatching a team of USDA inspectors to Japan to work with Japanese inspectors to reexamine every shipment currently awaiting approval, to confirm compliance with the requirements of our export agreement with Japan.

"I have directed that additional USDA inspectors be sent to every plant that is approved to export beef to review procedures and ensure compliance with our export agreements, and I am requiring that two USDA inspectors review every shipment of U.S. beef for export to confirm that compliance. I have also ordered unannounced inspections at every plant approved for beef export."

Johanns said these additional inspection requirements in the United States will be applied to all processing plants approved for beef export and all beef shipments designated for export.

"I am also requiring that all USDA beef inspectors undergo additional training to make certain they are fully aware of all export agreement requirements," he said. "And, I have directed my staff to coordinate a meeting of representatives from all U.S. processing plants that export beef to review those requirements."

California beef producer John Harris, whose company was the first to reenter the Japanese market, said, "This situation is extremely frustrating. We've done an excellent job in our own company of strictly adhering to all the standards and have gotten up to exporting 50,000 to 60,000 pounds of beef a week to Japan.

"That was a major breakthrough for us. Now this comes along and we're probably going to have a problem for some period of time, but hopefully it's not too long before it's resolved. It was an isolated mistake on the part of some veal company in New York.

"And, from a phytosanitary perspective, it shouldn't take very long to resolve this situation, as long as they can identify the plant the meat was from," Harris said. "If it's viewed rationally as an isolated case, then I'd hope we could get exports back in a matter of a few days.

"We don't know what will happen to the product our company has in transit to Japan, or what will happen with the product that has just arrived. We can divert the product we have here and lose the incremental sales. We have a lot of questions, but we really don't have answers right now.

"We hope all the parties will react quickly--that Japan is rational about what has actually happened and that USDA really gets into the case and assures Japan this is something they won't permit to happen," Harris said.

San Joaquin County cattleman Kenny Watkins, who is California Farm Bureau Federation second vice president, said, "We've been struggling for two years to get the border with Japan open and then somebody screws up, whether it was USDA or the packing plant. It sounds like Secretary Johanns is going to deal with this situation swiftly, but we never know how the Japanese government is going to react. There are a number of scenarios that could play out.

"Our concern is what's going to happen to all the product in the pipeline and what it will mean for our producers," Watkins said. "It has taken us a month or so to gear up and we're busy shipping. With the shutdown, the magnitude of the losses will depend on how it's handled in Japan.

"If they'll open the boxes and inspect the meat as it gets there, that's one thing. If they just dump it all, that's another issue. It's too early to know how bad this is. It could be horrible or it could be a bump."

Watkins said the reaction of the U.S. commodity markets is understandable, but disappointing.

Negative movement in the futures market has an immediate impact at the auction yard, Watkins said. On Friday, the Chicago Mercantile Exchange reported a 525-point drop for live cattle futures for April 2006, followed by equally dramatic point drops through February 2007.

"The futures market has been driving the live market prices," Watkins said. "Today (Jan. 20) was not a good day to sell cattle. I probably won't try to sell any cattle for a couple more months. But, we've existed for the past two years without any export markets. It can only get better."

Watkins said for California beef producers, there's nothing else to do but remain positive about the outlook for international trade.

"We've had decent live prices, even with the border closed," he said. "But, until this is straightened out, the whole industry is going to be paying for someone else's sloppiness or greed. California Farm Bureau is keeping a very careful eye on this situation.

"Action taken by Japan today to halt U.S. beef imports is an unfortunate temporary setback to U.S. cattle producers, particularly in light of recent success to re-open the market," Bob Stallman, president of American Farm Bureau Federation said. "The vertebral column found in the shipments does not pose a health risk since the animal was less than 30 months of age."

He said AFBF is closely monitoring developments in this matter.

"We commend the action taken by Agriculture Secretary Johanns to work with Japanese inspectors and to tighten U.S. inspection protocols. Farm Bureau remains committed to restoring beef shipments to Japan, and we support Secretary Johanns' efforts to re-open the vital Japanese market for U.S. cattle producers."

(Kate Campbell is a reporter at Ag Alert. She may be reached at kcampbell@cfbf.com.)

Permission for use is granted, however, credit must be made to the California Farm Bureau Federation when reprinting this item. Top