May 2003 was the beginning of a crisis for the Canadian beef industry. Alberta officials confirmed that a sick cow sent to slaughter in January was infected with bovine spongiform encephalopathy (BSE), commonly known as mad cow disease. The cow had been considered substandard and had been removed from processing as food for humans or other animals. However, this did not prevent the resulting public scare as the United States, Japan, South Korea, and Australia temporarily banned imports of Canadian beef and live cattle. The crisis escalated when in early 2004 it was discovered that an infected dairy cow in Washington State came from a Canadian herd 11 years prior to slaughter. Government regulators and consumer groups were alarmed because humans who eat contaminated beef may become ill with a fatal brain-wasting disease. The finding of mad cow disease caused prices paid to cattle ranchers to drop considerably. The ban cost the Canadian beef industry an estimated $11 million per day. Mad cow disease destroyed the British beef industry during the 1990s, and industry groups wanted to avoid a similar fate in Canada.
The only known cause of mad cow disease was the ingestion of infected animal parts. For many years, cattle had routinely been fed by-products from the beef rendering industry. Before the 1990s, this practice was viewed as an economic and ecological success. In the rendering process, the remains were ground up and then cooked, which removed the water. The residue could be turned into fats, oils, or meat and bone meal. The rendering process provided beef by-product revenues, reduced the cost of protein in cattle feed, and avoided the need to dispose of the beef by-products because 99% of the slaughtered cattle was used. The concern about mad cow disease and changes in regulations related to beef by-products resulted in lost sales from Canadian beef by-products totaling approximately $84 million per year. Following an outbreak of mad cow disease in Britain, scientists determined the manner in which the disease spread. With this new information, regulators throughout the world banned the use of beef by-products in cattle feed. However, these 1997 changes did not prohibit the use of beef by-products in feed for other types of animals, such as poultry, pigs, and pets. Canada also allowed the use of by-products from other types of livestock to be used in cattle feed. Most European countries do not allow the parts of the cow that can pass on BSE (e.g., brain, spine) to be used in any animal feed. Some consumer activists called for a complete ban on the use of mammal by-products in animal feed. Others called for expanded testing of cattle, which presently could be done only on dead animals.
Cattle industry groups argued that these measures were not economical because they would dramatically increase the cost of beef because the unused parts would need to be disposed of, which would be costly, especially in light of possible BSE contamination concerns.
REQUIRED
Conduct research on the Internet to find articles and other information that discusses the pros and cons of using beef by-products in animal feed. Answer the following questions:
A. What is likely to happen to Canadian beef by-products if they are not sold for use in animal feed?
B. Suppose the Canadian government bans the use of all types of animal by-products in livestock feed.
1. How would the ban most likely affect the cost of main products in the cattle industry? Explain.
2. How would the ban most likely affect the cost of main products in other livestock industries, such as pigs and chicken? Explain.
C. Besides the effects in Part B, describe the likely economic effects on the Canadian cattle industry if the use of beef by-products is banned for all types of animal feed.
D. What responsibilities do Canadian regulators have to various stakeholders in this issue? Consider the following types of stakeholders:
• Canadian cattle industry
• Other Canadian livestock industries, such as pigs and chicken
• Other Canadian food manufacturers
• Consumers of Canadian beef (both national and international)
E. Industry representatives argue that consumers of Canadian beef face no serious risk from mad cow disease. How valid is this argument?
F. In your opinion, should Canada ban the use of all types of animal by-products in livestock feed? What values did you use to reach your conclusion?