Mad Cow Nervousness May Drive Consumers Away from Beef

May 22, 2003

COLUMBUS, Ohio — Chicken and pork rather than beef may be the meats of grilling choice this Memorial Day holiday, if U.S. consumers express concerns over the recent case of mad cow disease identified in Canada. “If consumer demand gets shaken — I doubt if all of those burger-eating consumers will become vegetarians — people will be turning to pork and chicken this Memorial Day weekend,” said Brian Roe, an Ohio State University Extension agricultural economist. “Memorial Day is a bit of an inauspicious time for this to occur since it is a huge weekend for grilling activities and sets the pace for the summer demand season for beef. It looks like we are in for damp weather, particularly on the East Coast, which is additional negative news for beef and other grillables, and if this issue of mad cow disease captures the attention of the American consumer, it could be another reason why chicken and pork will go on the grill rather than beef.” Roe, an assistant professor in the Department of Agricultural, Environmental, and Development Economics, said consumer demand is the most critical issue surrounding the confirmed case of mad cow disease, also known as BSE (bovine spongiform encephalopathy), in the Canadian province of Alberta earlier this week. “U.S. consumers will shy away from buying beef if they think there is any potential that the U.S. market might have some beef associated with mad cow disease,” said Roe. “But so far it doesn’t seem to have shaken the markets as much as it could. For example, upon the release of the information, the future markets went down to the maximum they were allowed to go on any particular day. The following day, however, much of that loss in prices was regained, suggesting the initial reaction was that consumer demand would be shaken, but they projected that it wouldn’t be that much of an issue, hence prices strengthened to within striking distance of the original price levels before the outbreak.” Consumer response, whether short term or long term, will have an impact on beef prices, and may create more of a demand for other meats, like chicken, turkey or pork. “It could mean a substantial increase in prices for beef, depending on how long the embargo of beef products from Canada continues,” said Roe, adding that beef exports from Canada have been temporarily suspended. The United States receives roughly 9 percent of Canada’s beef, whether processed or through live animals. “We are basically facing a 9 percent shortfall of beef now if demand were unchanged,” said Roe. “And roughly speaking, for every 1 percent of supply you take away from the marketplace, price goes up anywhere from 1 percent to 2 percent depending on demand conditions.” Bans on Canadian beef may open up export market opportunities for U.S. cattle producers, as well as allow poultry and pork producers to compete in the market. “In the eyes of the U.S. market, there are mixed effects with the BSE case in Canada,” said Roe. “For the producers, it’s a double-edged sword. They like the fact that supply is being reduced because they can get higher prices, but the longer the issue lingers, the more likely general demand will be shaken, hence, demand will come down and subsequently we’ll experience lower prices.”

Author(s): 
Candace Pollock
Source(s): 
Brian Roe