Japan Situation Continues To Haunt The Market

Little progress has been made in reopening the border with Japan, and the delay is being felt in the fed-cattle market. Given the projected summer breakevens and the losses anticipated for the feeding industry, one would expect the political pressure to reopen the border to intensify.

This past week, Secretary of State Condoleeza Rice and U.S. Ambassador to Japan Thomas Schieffer again pressed the issue. Schieffer even suggested an all-out trade war could ensue if the issue isn't resolved soon. Still, Japan remains recalcitrant, and who can blame them? Japan has endured absolutely no consequences for its failure to abide by its agreement.

The billions of dollars the U.S. cattle industry has lost due to BSE are easy to dismiss when profits are at the record levels of recent years. The pain of lost opportunity, however, will be felt more directly in the coming months by feeders, and by cow-calf producers in next fall's calf market.

It's absolutely amazing the export situation hasn't evoked a greater outcry from grassroots cattlemens. We're either blind to it because of recent profits, or we've been distracted by frivolous internal debate about trade and BSE. These billions in losses will never be recaptured, and history likely will reveal the U.S. cattle industry largely allowed it happen through our passive, almost welcoming, acceptance of such treatment from a leading trading partner.

It's time for a revolt. Cattlemen should be throwing Sony Walkmans into Boston Harbor in outrage. Instead, we seemingly join Japan in concerns about the safety of our product -- despite all the scientific data to the contrary.

I've been criticized for seemingly abandoning my basic marketing principle of the customer always being right. First of all, I don't advocate the philosophy entirely. A customer focus is absolutely paramount but customers often don't know the possibilities or their true desires. Listening solely to the customer has a tendency to inspire incremental improvement while stifling innovation and radical bold new ideas.

Second, this isn't an issue of responding to consumer demands. It's an issue between two governments and whether Japan will live up to the agreement it signed. If the U.S. had access to Japanese markets and consumers and, through their purchases, Japanese consumers were signaling they wanted additional safeguards, that would be one thing, but that's not the case.

Those who advocate the U.S. accept whatever Japan -- as the customer -- demands is giving the green light to any non-tariff trade barrier. It effectively puts the global beef trade at peril, and is the very reason we have trade agreements, and why they need to be respected and enforced.

BSE is a case study in overreaction. No health risk has been more overstated or inflated in the minds of consumers. The U.S. has nothing to apologize for regarding the safety of its product. The U.S. has three cases of BSE out of a cattle inventory exceeding 100 million head.

Japan is the country that failed to institute safeguards and firewalls for years after the U.S. implemented them. Japan has had 24 cases of BSE and can expect to continue to see cases for quite a few years -- in a national cowherd that is a small fraction of that of the U.S.

While there's no risk to the Japanese consumer from eating beef of either Japan or U.S. origin, the fact is that if there were a risk, the risk from eating Japanese beef would be astronomically higher.

Lastly, it's time everyone understood what testing is all about. It's not about protecting consumers; that's done via age requirements and removing SRMs. Our politicians have allowed the largest segment of production ag in the U.S. to lose billions for no justifiable reason, and we in the industry have failed to adequately express our concern.

Last week's case of BSE, our third, underscores the U.S. system's difficulty in tracing the cow and documenting her age. It's been nearly three years since Canada had its first case of BSE, which underscored the importance of animal trace-back. Yet, the U.S. still doesn't have a national program in place.

When BSE was found in North America, some in the industry tried to tell people it was a Canadian problem. They tried to leverage the issue into achieving their political agenda relative to trade. They were willing not only to elevate the risk of BSE in consumers' minds but ignore sound science. Why isn't someone asking where we'd be today if these activists' agenda had been adopted. What would the consequences of their direction have been?

Others also claimed trade harmed the industry; the economists were all wrong, they howled. They pointed to record prices and profitability despite losing our world markets as proof.

Now, we can now look back and see prices were demand-driven, not supply-driven. We can see that in this time of record prices we actually imported near-record volumes of product, that we were suffering through the most negative trade balances in history, and actually had record net beef supply levels.

Where are these people who spread these assertions since proven false? Let's compare results to predictions.

I'm not saying we should spend a lot of time pointing out failures, and the incongruence between promises/assertions and results. I advocate moving forward, but it's dangerous to not study and grasp the failures of the past. The danger, of course, is we may be prone to repeat them. -- Troy Marshall