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Bovine Spongiform Encephalopathy (BSE) is a degenerative central nervous system disease afflicting cattle and is almost always fatal. It was first identified in the United Kingdom in 1986 and an overwhelming majority of the cases reported has occurred there since then. The initial policy responses were designed to control the spread of the disease and then to eradicate it. The events, however, took an unexpected turn when on 20th March 1996 the Government of the United Kingdom (UK) announced that exposure to BSE was the most plausible explanation for fatalities in ten relatively young individuals afflicted with a new variant of the Creutzfeldt-Jakob Disease (CJD), a spongiform encephalopathy observed in humans.

The possibility of a link between the variant-CJD and BSE sparked a strong reaction by consumers, with demand for beef reportedly falling by up to 70 percent in the EC member countries in the immediate aftermath of the announcement. In most cases, demand shifted towards other meat categories. These reactions translated into a sharp fall in EC cattle prices and a concomitant strengthening of poultry and, particularly, pig prices (see graphs).

The Government of the United Kingdom and the EC immediately announced the implementation of a new set of measures that culminated in the banning of exports of cattle, beef and beef-derived products (including gelatine, tallow and semen) from the United Kingdom to other EC members and non-EC countries. In May the British Government began slaughtering cattle born between 1990 and 1993, considered to be most at risk. Although a link between variant-CJD and BSE has not been proven, consumer confidence about the safety of beef suffered a significant setback, not just in the EC but also in other parts of the world.

Given the uncertainties surrounding the BSE crisis, it is too early to determine what is likely to occur in the short and longer term in the EC and international meat and feed markets. A comprehensive assessment, however, has to take into account not only the substitution but also the overall effects of loss in consumer confidence, which may linger quite a long time should a link between variant-CJD and BSE subsequently be proven.

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