The 1996 announcement of a potential link between vCJD in humans and BSE in cattle elevated BSE-related concerns and shifted them from an animal health issue to a human health issue, resulting in significant feed regulations being imposed, particularly aimed at meat and bone meal (MBM). In August 1997, the U.S. Food and Drug Administration (FDA) implemented a regulation prohibiting the use of mammalian protein, primarily MBM, in the manufacture of ruminant feeds. These mammalian protein sources were excluded from feed because the suspected infective abnormal prions are thought to be transmitted in MBM rendered from infected cattle.

U.S. MBM prices declined by half over the next two years, from a high of $431 per ton in April 1997, attained in part due to drought conditions in 1996 that drove grain prices to record highs, to a low of $187 per ton in March 1999. In the summer of 1997, there was segmentation of the MBM market into two markets, porcine-derived (primarily from hogs, horses, and other non-ruminant
animals) and ruminant-derived MBM. Porcine MBM averaged a premium of $15.78 per ton over the period January 1998-December 2003, just before discovery of the first U.S. case of BSE.

1997 FDA estimates indicated that the ban would ultimately cost the U.S. private sector approximately $53 million per year, reflecting $44 million in direct compliance costs to beef, rendering, and byproduct industry sectors, $171 million in lost value of products to the rendering industry (primarily a decline in value of MBM), and a gain of $163 million, through lower feed costs, to producers of non-ruminant animals. In 2002 had the narrowest price spread between porcine and ruminant MBM since reporting of the two price series began. MBM prices had recov-ered somewhat by 2003, with prices reaching a high of $395 in November.

 In late December 2003 and January 2004, both the FDA and the USDA’s Food Safety and Inspection Service (FSIS) imposed additional regulations to prevent the spread of BSE to humans and animals.These proposed rules were followed by an FDA rule announced in October 2005 that proposed to prohibit the use of certain cattle origin materials in the food or feed of all animals.

  In January 2004, MBM prices dropped to $173 in response to the U.S. BSE confirmation. But by April 2004, MBM prices had recovered to a peak of $397 per ton. The regulations FDA posted during summer 2004 sent MBM prices into another decline, reaching a low of $187 per ton in October 2004.

The increased use of these increased supplies of distillers’ grains would likely have offsetting effects on any increases in the prices of other protein feeds stemming from regulatory restrictions on MBM use.

Those regulatory measures announced by both FDA and FSIS required slaughterhouses to remove additional products from cattle and implicitlychallenged industries to find new uses for or means to dispose of materials on the expanded list of cattle materials prohibited from animal feeds (CMPAFs, formerly SRMs, or specified risk materials) and other materials banned from human or animal consumption. As a result, production costs increased and revenues declined for producers and processors of beef products and byproducts.

Coffey et al. estimated that per animal costs of feeding a beef steer would increase from $18.51 (includes $4.50 for increased feed costs from substitution effects for a ruminant protein to any farmed animal) to $23.61 (includes $9.60 for increased feed costs from substitution effects for a ban against feeding any animal protein to any farmed animal).

Additionally, increased restrictions on feed ingredients have introduced another round of disposal issues and costs. For example, renderers, who once picked up dead animals for free, become less inclined to pick up animals that cannot be rendered or will pick them up only at costs estimated at $100 or more per head. Disposal of additional CMPAFs becomes an issue for packers, renderers, incinerators and landfills in terms of increased costs and environmental concerns. Additional disposal costs for a 1,000-pound animal from which CMPAFs can no longer be removed are estimated at $18.75 per head. Estimates of increased costs of expanded CMPAF regulations, which include costs of disposing of CMPAFs, range from $2.16 per head (cattle under 30 months old) to $6.77 per head for older animals.