USDA’s Mad Cow Policy Threatens Independent Meatpackers

Just back from a pleasant Memorial Day weekend in Kansas, I noticed the Bush administration is appealing a federal judge’s ruling March 29th that it cannot keep a Kansas meatpacker from testing all its cows for mad cow disease (bovine spongiform encephalopathy, or BSE). The AP article is posted at http://www.chron.com/disp/story.mpl/business/4846051.html

I spent time with friends in north-central Kansas towns near the Nebraska border (Concordia, Jamestown, Jewel) and briefly in Kansas City. The meatpacker is Creekstone Farms Premium Beef of Arkansas City, Kansas (on the southern border of the state, about 20 miles north of Ponca City, OK).

Turns out Creekstone has been fighting this battle since 2004. The company specialized in exporting beef abroad, to countries like Mexico, Russia and especially Japan. When the first case of mad cow disease was found in the U.S. on December 23, 2003, the exports cratered.

Creekstone figured $20 a head to test each cow was a worthwhile expenditure to restore confidence in its exports. The Washington Post and Los Angeles Times say it spent $500,000 to build the first mad cow testing lab in a U.S. slaughterhouse and hired chemists and biologists to staff it. But the USDA, which controls sale of the mad cow test kits, refused to sell Creekstone enough kits to test each cow.

Why would the USDA take such a position? USDA said that there was “no scientific justification” for testing steers as young as Creekstone sells and that certifying some beef for export as disease-free might make Americans fear the safety of untested beef.

Creekstone argued, however, that the USDA bowed to pressure from the big four meat companies that control 80% of the industry, which don’t want to face competitive pressure to test all their cows. Creekstone slaughters about 1,000 cattle a day. The four largest meatpackers slaughter about 400 per hour. Obviously 100% testing would cost them some. They could weather the worst of the mad cow crisis by shifting attention to pork, chicken and turkey production. And it suited their interests if smaller specialty meatpackers like Creekstone were bankrupted by inability to export beef and gobbled up by the big four.

Whether it is it really effective disease control to test all cows for mad cow can be debated. The National Cattlemen’s Beef Association, which represents 27,000 cattle ranchers, says testing young animals “is like testing kindergartners for Alzheimer’s.” The USDA says that cattle in the U.S. slaughtered for food are generally between 18 and 24 months old, which is long before the disease is detectable.

Whether or not that claim proves correct, the economic reality is that the smaller meatpackers cannot survive without extensive mad cow testing.

Last August, USA Today editorialized against the USDA position. In an analysis entitled “Mad cow watch goes blind,” it questioned the effectiveness of the USDA’s plan to test only 1% of the 100,000 cattle slaughtered daily in the U.S. It noted that 65 countries have full or partial restrictions on importing U.S. beef products, due to fears that the testing is not rigorous enough. As a result, U.S. beef exports dropped from $3.8 billion in 2003 to $1.4 billion in 2005.

In this light, USA Today questioned the wisdom of the USDA keeping Creekstone from getting the test kits by invoking an obscure 1913 law intended to keep con artists from peddling bogus hog cholera serum to pig farmers.

Creekstone’s strategy is also supported by the Missouri Farmers Union, the Missouri-based Gateway Beef Cooperative, and the Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America (R-CALF USA), which says it has 18,000 members in 47 states. They agree USDA is favoring large meatpacking companies over independents—and if the USDA prevails, it will drive more independents to financial ruin.

This leaves the Bush administration in an interesting quandary. Normally a vocal champion of the free-market economy, it finds itself opposing small agricultural entrepreneurs’ innovative strategy for staying competitive. In the process, it ends up subsidizing agribusiness in its drive to eliminate smaller competitors. The kind of America we want to be is very much in the balance.

As USA Today editorialized, “…there’s little logic in stopping a company from exceeding regulations to meet the demands of its customers, or protecting its rivals from legitimate competition.” The federal judge ruled that the law as currently written does not give the USDA the authority to regulate mad cow tests or prevent meatpackers from testing. The Bush administration ought to follow the law.