From: Reuters
Published February 19, 2008 01:40 PM

Consumers seen shrugging off big beef recall

By Bob Burgdorfer

CHICAGO (Reuters) - Consumers are expected to keep eating beef in the wake of the largest beef recall in history, just as they did when the United States reported its first case of mad cow disease in late 2003, two economists said on Tuesday.

In fact, the recall this weekend of 143 million lbs of beef could be mildly bullish for beef prices, because it immediately took U.S. beef off the market, they said.

"When you remove that amount of beef from the market, assuming that consumers' tastes don't change, there will be an increase in the price of beef," said Jacinto Fabiosa, co-director of the Food and Agricultural Policy Research Center (FAPRI) in Ames, Iowa.

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Much of the 143 million lbs, which was raw and frozen beef produced since February 2006, has already been consumed, but economists said a drop in the supply coupled with no change in consumer demand should mean higher prices.

The recall is not expected to turn consumers away from beef because no illnesses have been linked to the beef and consumers have endured other food scares.

"It has to be in the first 5 minutes of a newscast and they have to have a picture of somebody suffering for it to register. Until that happens, it is a nonevent," said Michael Swanson, a Wells Fargo agricultural economist.

Consumers kept eating beef after the first U.S. case of mad cow disease in December 2003. U.S. beef exports dropped sharply then, but domestic demand was largely unchanged, the economists said.

"What did the consumers do when the BSE news broke in U.S. in 2004?" said Fabiosa. "If you gauge their response on what has already been revealed in terms of their sensitivity to those types of issues, you can probably be on the safe side and say it will not be too big a story."

Apparently investors agree. Shares of Tyson Foods Inc, the largest U.S. beef producer and biggest meat producer, were up more than 5 percent in New York Stock Exchange trading on Tuesday afternoon.

Cattle prices were higher at the Chicago Mercantile Exchange on Tuesday, with the April contract up 0.250 cent, or 0.25 percent, at 94.200 cents per lb.

The recall of 143 million lbs came after a video showed employees at California's Hallmark/Westland Meat Packing Co forcing lame cattle into the slaughter house, a violation of federal meat safety rules.

The plant has been closed since early February.

(Reporting by Bob Burgdorfer editing by Matthew Lewis)

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