BSE case confirmed in California

The USDA confirmed this week that a dairy cow in California was discovered with Bovine Spongiform Encephalopathy (BSE), commonly referred to as mad cow disease.

The age of the cow is not yet known. The animal was sent to a rendering facility and did not enter the food supply. The disease was discovered via government testing.

The USDA reiterated that the U.S. beef and dairy supply has been deemed safe for human consumption. Risk measures have been put into place since the December 2003 outbreak to limit risk to humans. BSE cannot be transmitted through an animal's milk.

Food analyst, Farha Aslam with Stephens Inc., does not expect any material impact on beef demand. She said since the major BSE outbreak in 2003, which stopped the U.S. export business temporarily, there have been 21 confirmed cases in North America (2 in the U.S. and 19 in Canada). These cases have been essentially non-events regarding both domestic and export demand.

“While cattle futures traded limit down on the news, unless the media fallout is unusually large, we anticipate the BSE finding will not have a material impact on Tyson Foods earnings,” Aslam noted.

Beef margins have been poor over the past several months but are beginning to recover. The question is, can margin recover enough for Tyson Foods to hit earnings expectations when the company reports May 7.

International fallout has also been minimal at this point. South Korea recently announced that they would “strengthen quarantine inspections” until all details of the recent BSE discovery were made known, but that U.S. beef would be allowed into the country.

That said, the outlook for beef profitability is uncertain, according to Aslam.

Two major Korean retailers have taken U.S. beef off the shelves, and have since requested more information on BSE. The retailers will likely follow the government's lead and reverse the decision, but no time table for the action has been established, she noted.

Japan, Taiwan, and the EU have all stated that they will not alter import regulations on U.S. beef