Organization for Competitive Markets
P.O. Box 6486
Lincoln, NE 68506
Date: July 2, 2004
FOR IMMEDIATE RELEASE
Contact: John Lockie, 406.628.9850
OCM Says USDA BSE Announcement Policy Costing Producers Over $6M Per Day
Lincoln, NE ~ The Organization for Competitive Markets (OCM) today said that USDA’s policy of announcing inconclusive positive bovine spongiform encephalopathy (BSE) test results is costing cattle producers over $6 million per day in lost market revenue. OCM urged USDA to reverse its policy so that only confirmed positive BSE results are released, along with other relevant information including the country of origin of the cattle.
On Friday, June 25, the first of two inconclusive positive test results was announced by USDA as part of its $70 million ramped up testing program that began on June 1. During subsequent testing at the agency’s national laboratory in Ames, IA, the animal proved to be free of the brain wasting disease. On Monday, June 28, the cattle futures market saw the largest decline since December 2003 when a Canadian Holstein cow located in Washington State was diagnosed with BSE.
A second inconclusive test was announced late Tuesday, June 29 by USDA. Conclusive test results are expected from the Ames, IA laboratory within four to seven days.
"These premature announcements by USDA are sending shock waves through the cattle industry, putting the brakes on live cattle trade and throwing cattle futures into a tail-spin" noted Fred Stokes, OCM President. "USDA’s policy of announcing inconclusive test results before more comprehensive testing can confirm or negate the results subjects the entire industry to rumor, critically impacting the strong markets cattlemen have experienced in recent months. USDA rejected Creekstone Farms’ proposal to blanket test for BSE because the agency was concerned about the negative market impact any initial positive tests might have. What we’re seeing today is significant market harm caused by USDA’s premature disclosure of inconclusive test results. This smacks of hypocrisy," said Stokes.
"USDA is using transparency as a basis for these announcements," added Stokes. "Unfortunately USDA is withholding all information except the inconclusive test results. We are not being told the country of origin of the animal being tested, its age, breed and location, which leads to widespread rumor and speculation putting markets under an unnecessary cloud of downward pressure."
OCM estimates the roughly $6 million market harm based upon the near term live cattle futures contracts at the Chicago Mercantile Exchange. August live cattle closed Friday at $89.35 and closed on Thursday, July 1 at $85.15 – a difference of $4.10. There are approximately 130,000 cattle at 1,200 pounds being processed each day. Thus, $49.20 per head or about $6,400,000 per day is being lost from the markets assuming the entire price reduction is due to the BSE announcements. The $6.4 million in losses does not include the equity drain on cattle currently in feedlots. Due to light cash trading, the full market harm to cow-calf producers may not become clear until next week.
On Monday, June 28 one the nation’s top five cattle feeding operations, located in Nebraska, opened the week with a show list of nearly 6,000 head. A spokesman for the privately owned operation said the company expected losses to exceed $1 million related to the first public announcement by USDA.
Today, Nebraska Governor Mike Johanns and the state’s agriculture department asked USDA to reexamine its policy of announcing inconclusive test results, citing the harm such announcements could have on the cattle industry. "These tests are sensitive and it’s very possible that you put the inconclusive results out and say it could be BSE and then find out its not," Johanns told the Associated Press. "In the meantime, you have had a tremendous impact on the market just like we have been seeing."
"USDA’s premature disclosure policy does not serve the public interest," said Stokes. "The only effect is between the time of the inconclusive announcement and the confirmation of the test. The agency is providing just enough information to harm the markets, but not enough information for producers to make informed decisions. As a result, confidence is being lost, rumors are circulating, prices have fallen, and millions of dollars are being lost even though market fundamentals have not changed. This is USDA crying ‘wolf’ for the packers in an effort to force producers back into a price-taking role," commented Stokes. "OCM urges producers to contact their congressional delegations immediately and ask them to intervene."
The Organization for Competitive Markets (OCM) is a multidisciplinary, nonprofit group of farmers, ranchers, academics, attorneys and policy makers dedicated to reclaiming the agricultural marketplace for independent farmers, ranchers and rural communities. OCM helps lead the Cattlemen’s Competitive Market Project which is a voluntary contribution program focusing on competition in the cattle markets.