China has joined other nations in suspending US beef imports after the discovery of the first US case of the deadly mad cow disease, authorities said yesterday.
"China will temporarily ban imports of US cattle and cow products. This does not include milk, milk products, leather and gelatin," the Agriculture Ministry and quarantine bureau said in a joint statement in Shanghai.
Total US beef imports to China are estimated to rise by 11 percent to 30,000 tonnes this year, according to US figures. About 10 percent of US beef is exported.
Japan, Mexico and South Korea, the top buyers of US beef, halted imports after the case was disclosed on Tuesday in a huge blow for the US$27 billion US cattle industry.
Other countries, including Singapore, Malaysia, Australia, Hong Kong, Taiwan, Russia, Ukraine and South Africa, have followed suit. Canada imposed a partial ban.
The incident will deliver a blow to the massive American beef industry and the overall economy, analysts say, but to what degree remains uncertain.
The beef industry is a powerful force in the US economy, accounting for some US$188 billion in economic activity and 1.4 million jobs, according to the National Cattlemen's Beef Association statistics.
Sales of cattle and calves alone represent some US$40 billion, or one-fifth of all agricultural receipts. Exports accounted for some US$3.4 billion last year, according to the US Meat Export Federation. Japan, South Korea and Mexico are the top markets.
Most US exports are expected to be halted in the near future, though the impact on domestic consumption remains unclear.
"Unquestionably, in the short term, there is going to be a huge economic impact," said Jan Novakofski, professor of animal science at the University of Illinois Urbana-Champaign. "When the Canadians had one case, we slammed the border shut on their industry and cost them billions of dollars."
Joel Naroff of Naroff Economic Advisors said there will be a short-term impact, but the long-term effect is unclear.
"Clearly there are some countries that have banned imports, and those markets are going to be closed for an extended period, so the export markets will be hurt," he said.
On the domestic front, Naroff said, "we don't know to what extent or if it has entered the food chain. If it has, that would be a different impact than if it was isolated."
Bank One chief economist Diane Swonk said there could be some economic losses from exports, but domestically the impact may be more of a shift away from beef to other products.
"It's not as if people stop eating," she said. "They may start eating more chicken. Steakhouses aren't going to be as full, and that has been a rising trend ... it creates a lot of substitution effects and a whole new set of winners and losers."
"But the big issue is how transitory it is. It had an impact for years in Europe, while in Canada it was more short-term," Swonk added. "If it gets to be a larger scare, it does create a much larger problem."
On Wall Street, losses were limited, as traders chose to wait for additional information, although fast-food chains such as McDonald's and meat distributors saw their shares tumble.
"Obvious candidates for negative stock price reactions include restaurants, meat purveyors and even grocery chains," said Smith Barney analyst Tobias Levkovich.
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