12/01 10:26 European Beef Prices Drop, Hurting Farmers, Amid BSE Scare By Jon Hurdle and Stuart Wallace

London, Dec. 1 (Bloomberg) -- European cattle producers say they face financial ruin as consumers abandon beef and prices plunge after outbreaks of so-called mad-cow disease raise fears of more deaths from infected meat.

The industry has seen prices fall 17 percent since mid- October, led by a 24 percent decline in France, the region's largest producer, and a more severe drop lies ahead as unsold supplies pile up, according to the European Union.

``This is a catastrophe,'' said Heinz Deselaers, a farmer who owns about 100 cattle in Niederrhein, Germany. ``People are getting hysterical about the situation, and this is going to cause extensive damage to my business.''

The industry's crisis comes at a time of low prices for some crops and declining agricultural profits. Farm incomes in the 15- nation bloc fell 3 percent after adjusting for inflation last year, the EU's statistical agency said.

Consumer confidence in beef has plunged as new cases of bovine spongiform encephalopathy are detected in European herds. Scientists believe the human form of BSE, variant Creutzfeld-Jakob disease, is caused by eating tainted beef. In the U.K., the disease has claimed the lives of more than 80 people.

The latest concern arose after the announcement last week of Germany's first cases of BSE, leading the government to introduce compulsory testing on all cattle slaughtered at the age of 30 months or more. Only five EU members -- Italy, Finland, Sweden, Greece and Austria -- have not yet announced a case of BSE.

In an attempt to calm consumers, European regulators this week proposed a ban on the use of bones and other remains as livestock feed.

After three new cases of BSE were detected in France this month, Italy partially blocked French beef imports, while Germany said it may halt imported beef.

Subsidies

In France, the primary farm union, FNSEA, is calling for more government subsidies for the beef-processing industry. Its president, Luc Guyau, told La Tribune newspaper that he would ask the government for direct subsidies and ``compensation'' for beef farmers to make up for cash shortages and loss of revenue.

France has recorded more than 90 cases of BSE this year -- more than half the 172 declared there since 1991.

Beef consumption in France since mid-October has declined about 40 percent, the EU estimated. Demand last week was less than half the year-ago level, according to Nils Beaumond, export manager with Intervev, a French meat and livestock association.

``Jobs are threatened across this industry,'' said Pascal Coste, a farmer with 50 cows in the Massif Central region of France. ``It's already happening, with businesses reducing working hours or temporarily laying people off.''

Even after the drop in prices, only about a third of all slaughter-ready cattle are being sold, forcing farmers to continue feeding and pushing up costs, producers said.

Health Panic

In the U.K., the crisis began in 1996 when the government admitted that BSE in beef could be transmitted to humans. The government responded by making it illegal to put any beef from cattle more than 30 months old into the human food chain.

At the time, prices plunged about 29 percent to about 170 pence ($2.44) a kilogram. The price stayed there until the recent French and German BSE outbreaks drove it down to around 155 pence, too low to make a living, U.K. farmers said.

``We need prices of 200 pence a kilogram,'' said Ed Reith, who has about 400 cattle in the Vale of Glamorgan, South Wales, estimating his savings would last about two years in the current environment.

The drop in beef prices, along with declining prices for other farm products, strength in the British pound and rising costs of fuel and fertilizer, is driving people off the land, said Reith, whose family has been farming beef since the 1960s.

Two farming acquaintances have recently committed suicide because of financial pressures, he said. One ``just went out one morning and hung himself in the barn. It was a hell of a shock,'' he said.

The problem is compounded by cheap imports, particularly of Irish beef, that have recently been diverted to Britain from France, where sales have plummeted, farmers said.

``The U.K. has become a dumping ground for beef,'' said Gordon Meek, who farms about 250 cattle in Northumberland, Northern England. ``We're just trying to get our money back without any profit at all.''

Consumers

An opinion poll for the weekly Die Woche in Germany showed that nearly a third of all people no longer want to eat beef after the discovery of BSE in cattle there, Agence France-Presse reported.

The crisis is spreading, with Denmark and Spain also this year reporting their first cases of BSE.

In Spain, beef consumption has dropped 15 percent in a week and prices have dropped 30 percent, AFP quoted the Spanish Association of Beef Producers as saying. In Portugal, beef sales are off 50 percent while supermarket sales have declined as much as 40 percent, AFP said.

``It's impossible to talk about how the BSE crisis is affecting prices, as there is just nobody willing to buy at the moment,'' said Deselaers from Niederrhein in Germany. ``The consumers are so worried at the moment that they think if they eat any beef at all they will immediately get CJD.''

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-- Martin Thompson (mthom1927@aol.com), December 01, 2000