Cattle market upswing may be targetted by cargill

At the end of November there was another BSE scare for American cattle farmers. The country and the media were quick to presume that this was another case that could cripple the industry, but they both turned out to be wrong.

The cattle industry works on a 10-year cycle, and the Fort Morgan Cargill Meat Solutions (formerly Excel) plant is a prime example of that.

The plant was forced to lay off 150 employees and cut the hours of those remaining by four to eight hours per week last January, and although, since then, all those people have had a chance to get a job with the plant, very few of the actual positions have been recreated and the hours remain the same.

There are a couple of factors that are pressuring the industry.

“The presumptive positive and the negative test results were additional factors that added to the volatility,” Mark Klein, director of communications for Cargill Meat Solutions, said. “Overall the primary factor, however, remains the low availability of market-ready cattle.”

Klein stressed that the cycle is self-correcting where the production becomes low and the price rises prompting more farmers to invest in beef production.

In January of this year, a single case of bovine spongiform encephalopathy (BSE), also known as “mad cow disease,” in Washington caused many countries to place a ban on beef imported from the United States.

Mexico was the second biggest importer of American beef behind Japan. While Japan’s market is still closed to the U.S. beef industry, Mexico has reopened its market easing the burden on beef packers including Cargill Meat Solutions of Fort Morgan.

Meanwhile, U.S. officials are working to reopen the Japanese market, and Klein believes that they are close to coming to an agreement.

“The U.S. and Japan have created a framework, and that’s the first step,” Klein said. “Taiwan and South Korea have indicated that they might be willing to lift their ban once Japan is satisfied.”

There is no hard and fast rule that will determine when the U.S. beef exports will be back in full swing. According to Klein, a lot depends on discussions between the respective governments, but he is hopeful.

“I think that the U.S. negotiators have worked very hard and made significant accomplishments,” Klein said.

Klein emphasized that his company is committed to seeing out the hard times and continuing to expand its production.

“This year underscores our commitment to the beef industry, despite the challenges,” Klein said. “You have to be in the business for the long haul; nobody said this was an easy business to be in.”

The general manager of the Fort Morgan plant, Mike Chabot, echoed these sentiments.

“We need to understand that this is the most difficult part of the beef cycle,” Chabot said. “We are well-positioned and expect these times to get behind us.”

The general consensus is that in the next year the industry will steadily improve as markets open up and the availability of market-ready cattle increases.

The beef industry is no stranger to adversity. In the 1980s the European Union banned beef that had been treated with growth hormones. That was a major setback, but the industry recovered.

During the 1990s Mexico was rivaling Japan as the number one destination for exported U.S. beef. Then the peso collapsed and brought a chunk of the export market with it, but Mexico recovered as did the industry.

Klein doesn’t see the hysteria about BSE being any different.

“What we stress to our clients and employees is that a couple of years ago Harvard did a risk analysis of BSE in the U.S.,” Klein said. “They said it might be possible for some cows to have the disease, but the firewalls would prevent it from being a problem.”

One of the firewalls that he is talking about is the ban on cattle feed that includes beef products. This was found to be the reason for the transmission of the disease in the United Kingdom when the “mad cow disease” was first discovered.