The Beef Business Stays Home and Bulks Back Up

Exports Lost to Mad Cow Scare Are Offset

Facing the loss of a key export market for its short ribs when the mad cow scare temporarily paralyzed the American beef industry six months ago, Harris Ranch Beef Co. of Selma, Calif., began experimenting.

Over the first few months of the year, it tested two flavors of short ribs that might appeal to U.S. consumers, spicy sesame and teriyaki, and just won the necessary government approval to sell them through grocery stores and restaurants.

"I have a little less hair and I'm a little more gray than when we started on this," said Bruce Berven, director of marketing for the company. But if the new product sells, it could use up all the short ribs the company once sold to South Korea.

Since the discovery of one case of mad cow disease in Washington state in late December, the U.S. beef industry has had to deal with uncertainty about consumer response, volatile prices, increased safety costs -- and the start last week of a more intensive testing program for mad cow disease. Yet, as the Harris Ranch innovation shows, many companies are faring better than they expected, even as the two biggest export markets, Japan and South Korea, remain closed.

The $175 billion-a-year beef industry has strong domestic sales, aided by the popularity of low-carb, high-protein diets. And the biggest, most diversified processors have also been helped by the strong sales and higher prices of pork and chicken, both here and abroad.

"Demand in the U.S. does not seem to have flagged at all," said Jim Herlihy, a spokesman for Swift & Co., another leading processor. "Consumers are continuing to buy despite the higher prices."

Industry officials know there may be more upheaval around the corner. Last week the government began expanded testing of both suspect and healthy cows. With new, faster tests being used, the industry is expecting at least some false positive results.

No one knows how consumers will respond if a second case of bovine spongiform encephalopathy (BSE) is found.

"The fact is, it's possible we're going to get another case. The surveillance system is going to determine BSE, if we have it, with a very high degree of accuracy," said Janet Riley, a spokesman for the American Meat Institute. "You just don't know how future cases will be perceived."

Beef exporters are still trying to recover from the lost business that accompanied decisions by Japan, South Korea, Mexico and many others to close their markets in the wake of last year's mad cow discovery. Though only about 10 percent of U.S. beef is exported, it is still a large market.