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Mad cow to weigh on grain futures

U.S. Agriculture Secretary Ann Veneman made the announcement late Tuesday.
U.S. Agriculture Secretary Ann Veneman made the announcement late Tuesday.

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CHICAGO (Reuters) -- Corn and soy complex futures at the Chicago Board of Trade are expected to open sharply lower Wednesday following the discovery of a case of mad cow disease in Washington state, analysts say.

The expected weakness in both the markets is likely to drag down wheat futures, the analysts said.

"They are going to open significantly lower," said grains analyst Joe Victor of brokerage Allendale Inc., adding that detection of the disease would hit hard livestock futures at the Chicago Mercantile Exchange.

"Cattle is the number one consumer of corn, and the number three consumer of soymeal," Victor added.

The first U.S. case of the deadly mad cow disease was found in an animal in Washington state, Agriculture Secretary Ann Veneman said late Tuesday.

Shares of McDonald's, the world's biggest restaurant chain, tumbled to $24.20 on Instinet from their close of $25.28 on the New York Stock Exchange after the news broke Tuesday evening.

McDonald's later said its supply chain is not linked to the case of mad cow disease found in Washington state.

Mad cow disease, also known as bovine spongiform encephalopathy (BSE) has never been found in the United States before, but devastated the British industry in the 1990s.

Grains analyst Dan Basse, president of AgResource Company, said he was also expecting CBOT futures to open lower.

But he noted that the soy complex could get a price bounce if authorities ban the use of meat and bone meal, essentially ground up animal carcasses, as a source of feed to poultry and pork.

"Meat and bone meal is banned in the European Union, but in this country we use 3 million tonnes each year to feed poultry and pork," Basse said, adding that a similar ban in the United States would boost demand for soymeal animal feed.

Outbreak feared

The U.S. banned imports from Canada after one Alberta cow was confirmed in May as having had the disease.
The U.S. banned imports from Canada after one Alberta cow was confirmed in May as having had the disease.

Grains analyst James Barnett of brokerage Refco Inc. said the CBOT grain futures, especially corn, would open lower on Wednesday. He said any rally soy complex would only come if Washington announces a specific ban on meat and bone meal.

Futures contracts based on the value of cattle are traded on the Chicago Mercantile Exchange.

The U.S. cattle industry has long feared an outbreak, which could result in billions of dollars of losses.

On May 20, Canada confirmed that one Alberta cow, which was slaughtered in January, had mad cow disease. The discovery of the sick Canadian cow triggered an immediate halt of Canadian meat exports by most countries as a precaution.

Reports of the U.S. mad cow disease case are having little impact on markets in Tokyo Wednesday. The Nikkei 225 is flat, although McDonald's Japan is down 1.33 percent to 2220 yen.

The dollar is trading at 107.46 yen, slightly stronger than Tuesday's close.

Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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