PULLMAN, Wash. — Consumer confidence influenced by trust in government will have more influence than scientific facts on how heavy the U.S. beef industry’s losses will be as a result of the current Mad Cow crisis, say two Washington State University agricultural economists.
Thomas Wahl, WSU IMPACT Center director, and Jill McCluskey have surveyed Canadian, Japanese and U.S. consumers following Mad Cow outbreaks in Canada and Japan. Canada experienced a Mad Cow crisis in 2003. Japan experienced an outbreak in September 2001.
Consumer perceptions are heavily influenced by trust in government. The economists report beef consumption remained high in the wake of the Canadian outbreak because consumers believed their government was taking proper actions and that their meat was safe.
But in Japan–as in the British outbreak that began resulting in human deaths in 1995–consumers had less confidence in their governments and beef consumption was badly hurt.
“In Britain, the public perceived public officials as having lied,” McCluskey said. “Definitely,” Wahl said, “and the same is true in Japan. When the presence of meat and bone meal–a source of transmission of Mad Cow disease–was known, they didn’t ban it. Then it took a lot more effort to convince consumers in Japan that their meat was safe, because their lack of confidence. It took a much stronger reaction by government to assure consumers that it was safe.”
Wahl said British scientists first identified Bovine Spongiform Encephalopathy, or BSE, in cattle in 1985 but were slow to take measures to prevent its spread. Government assurances to consumers that their beef was safe continued until the first human deaths ten years later.
In the present U.S. crisis, Wahl said “It’s very important that USDA is forthcoming with what they discover and how they react, and what they’re doing to clean up the problem.”
McCluskey and Wahl agree that USDA’s announcement last week of increased inspection and tighter regulations dealing with downer cattle are positive moves that should help maintain the high level of confidence that American consumers have in their meat supply.
Wahl said beef consumption in Europe and Japan dropped to about half customary levels in the wake of Mad Cow disease outbreaks. But there was only a small drop in beef consumption among Canadians following the 2003 outbreak there.
McCluskey said Japanese beef consumption tripled over a two- decade period leading up to the Japanese outbreak. Japan relied heavily on imports, mostly from Australia and the United States.
“After BSE was discovered, the average price of a dairy cow in the Chiba Prefecture fell from about $2,500 per cow in August to about $500 per cow in December, as consumer demand fell off,” McCluskey said. BSE is short for Bovine Spongiform Encephalopathy, commonly known as Mad Cow Disease.
Because of low consumer confidence in government, Wahl said European beef consumption is only now getting back to the level before the outbreak.
Wahl said domestic–U.S.–beef consumption will depend on how consumers perceive the scope of the problem, and how the government is responding.
“American consumers trust the USDA to solve these problems quickly and historically they’ve done a good job. If it turns out that there is only one case, I don’t think there will be much drop off in consumption,” Wahl said. “If the scope proves to be broader, we will see a bigger drop in consumption.”
Wahl said consumer confidence also will be critical in restoring international markets for U.S. beef. He said all countries have a right and obligation to protect the safety of their food system.
“Embargos against U.S. beef are justifiable in terms of protecting the safety of their food systems, Wahl said. The question is how long they keep the bans in place. They will be in place until we convince them we’ve solved the problem and put practices and measures in place that will keep any BSE-contaminated beef from entering the food system.”
McCluskey and Wahl said Japan’s handling of the BSE outbreak proved costly. Beef consumption dropped when the outbreak was reported, but “the handling of the BSE scandal by the Japanese beef industry and government further damaged consumer confidence,” the economists reported.
It took more than two weeks from the first confirmed case of BSE in Japan for the Japanese authorities to announce the finding. After the first domestic BSE case, the Japanese beef industry assured consumers that domestic beef was healthy, but their credibility was harmed when, only a month later, a second case of BSE was discovered.
Japanese beef consumption dropped 70 percent and major exporters such as Australia and the United States lost up to 50 percent a month in volume of beef sales between September and November 2001.
The WSU economists say testing all beef put into export markets for BSE would help restore foreign markets, although the cost could be prohibitive. Their study of Japanese consumers after the BSE discovery in Japan showed that they would pay more than 50 percent more for beef labeled BSE inspected than for the same cuts that hadn’t been inspected.
Wahl and McCluskey said a similar study by economists in France, in 1997, found that French consumers would pay premiums of 14 percent to 22 percent for beef guaranteed to be BSE free.
McCluskey said quality labeling — labels that assure meat is BSE free — can only be effective if monitoring or other means ensure the labeling is accurate and honest.
One of Japan’s measures to restore consumer confidence was revision in June 2000 of Japanese Agricultural Standards to include an inspection and certification system for food products.
A report, “Mad Cow Disease: Implications for World Trade,” can be read or downloaded from the WSU IMPACT Center Web site at http://impact.wsu.edu/. Click on “BSE Report” near the bottom of the left hand column. The report was written by Wahl and Corey Pickelsimer, before the U.S. crisis began.
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