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Effects of Mad Cow Scare Felt on Both Sides of Border

June 13, 2005|Evelyn Iritani | Times Staff Writer

SPINNEY HILL, Canada — For decades, Canadian cattle ranchers like Mark Ellis considered the American border a small irritant in an otherwise close and generally happy tale of globalization.

Canadians, enjoying lower feeding costs than American ranchers, sold their cattle to feedlots and packing houses south of the border. Those U.S. plants packaged the beef for American dinner tables and marketed it to grocery stores and restaurants in Tokyo and Seoul.

It was a win for both sides.

Now this close relationship appears to be unraveling, thanks to a lawsuit by a group of Montana ranchers over fears of the spread of bovine spongiform encephalopathy, also known as mad cow disease, from Canadian herds. In March, a federal judge issued an injunction barring the Bush administration from lifting a ban on imports of Canadian cattle.

To Ellis, 40, a fifth-generation rancher in the province of Saskatchewan who lives with his wife and four children on the Saskatchewan River, that move was nothing more than old-fashioned protectionism.

"They're just a bunch of rich, political guys," he said angrily when asked about the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America, or R-CALF USA, the group that filed the lawsuit.

This turmoil in the North American beef industry -- with increasing discord on both sides of the border -- is a powerful lesson in how a seemingly small dispute can have huge ramifications in a globalized world.

Prices in Canada have plunged. Ellis gets $150 to $200 apiece for his older cattle, less than one-third of what he received prior to the mad cow scare. Canadians saddled with unsold animals are pouring hundreds of millions of dollars into expanding or building new packing plants. Meanwhile, more than three dozen packing houses in the U.S. have closed, in part because of a shortage of cattle.

The changes are dramatic, given the close cross-border relationships that had developed in the North American beef industry, spurred by the passage of the North American Free Trade Agreement in 1994.

After NAFTA, beef processing within the region shifted to the United States, home to the world's largest beef-consuming population. The lifting of trade barriers made it easier for the four leading U.S. beef processors -- Tyson Foods Inc., Cargill Inc., Swift & Co. and National Beef Packing Co. -- to consolidate their control of the processing industry. They invested in modern facilities, benefiting from the economies of scale that brought costs down.

The large U.S. multinationals also became the primary marketers for North American beef in lucrative export markets in Asia.

Cattle flowed both ways across the border, depending on currency fluctuations, weather and other things that affected costs. Canada was particularly competitive in the growing and feeding of cattle because of lower costs for feed and land. Canadians shipped as many as 1 million animals a year to the U.S., which purchased nearly half that country's cattle and beef products.

But the cross-border flow screeched to a halt May 20, 2003, when a cow infected with mad cow disease was discovered on a farm in Alberta, Canada. Three more diseased Canadian cows were eventually discovered, including one that had been shipped to Washington state. Dozens of countries, including Japan, South Korea and Mexico, banned U.S. and Canadian beef imports.

The U.S. Department of Agriculture reported Friday that another animal tested positive for the brain-wasting disease, reigniting fears that foreign countries would shun U.S. beef again. The government said the suspect animal did not enter the human food or livestock feed supply because it was a "downer" -- unable to walk when delivered for slaughter.

The USDA said that more tests would be conducted in the U.S. and Britain to determine whether the animal was infected and that results would be available in about two weeks.

The U.S. and Canada estimate they have lost billions of dollars in export sales since 2003.

Mad cow disease is believed to be caused by abnormal proteins and is passed on when cattle eat feed that has been contaminated. In Britain, where the disease surfaced in the 1980s, 183,000 animals have tested positive for the disease. In rare cases, humans have contracted the illness by eating the meat.

In the months that followed, the U.S. and Canada tested hundreds of thousands of cattle, strengthened their testing systems and imposed measures to prevent diseased animal parts from being ground up for feed. In the fall of 2003, the Bush administration began allowing boxed Canadian beef into the U.S. market and a year later announced that it would reopen the border for Canadian cattle in early 2005.

That triggered a rift in the U.S. beef industry. R-CALF, a ranchers group based in Montana, filed its lawsuit to stop the border opening, contending that the Bush administration was risking the contamination of the U.S. cattle herd.

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