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Mad cow slams U.S. restaurants

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U.S. Secretary of Agriculture Ann M. Veneman confirms the mad cow case.
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•Mad cow disease was first reported in the United Kingdom in 1986, peaking in 1993 with almost 1,000 new cases per week. 
•In 1996, variant Creutzfeldt-Jakob Disease (vCJD) was detected in humans and linked to the mad cow epidemic. Eating contaminated meat and cattle products is presumed to be the cause.
•Both are fatal brain diseases with unusually long incubation periods, often lasting years.
Source: CDC
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NEW YORK (CNN/Money) -- The stocks of McDonald's, other restaurant chains and meatpackers all took a big hit Wednesday after the Agriculture Department recalled 10,000 pounds of U.S. beef and reported what is apparently the first case of mad cow disease in the United States.

The impact on the U.S. economy from the apparent discovery of mad cow disease could be substantial. The nation's cattle business is a $27 billion industry, with about $3.5 billion of exports expected this year, according to the U.S. Meat Export Federation in Denver.

"This would be significant if we were to lose even half our export sales," federation president Philip Seng said. "This would be a very debilitating development in the United States."

In addition, lost business at restaurants and supermarkets -- and in related food processing and servicing industries -- are not yet know but could be huge.

Investors reacted swiftly to the news of the recall by Agriculture Secretary Ann Veneman, late Tuesday.

McDonald's Corp, the world's largest hamburger chain and one of the 30 stocks in the Dow industrials, tumbled 6 percent.

Rival Wendy's International Inc. sank about 4.5 percent while the smaller restaurant chains Outback Steakhouse and Lone Star Steakhouse also fell. Trading volume was heavy.

Both McDonald's and Wendy's said their supply chains were not linked to the apparent case of mad cow disease found at a meat packer in Washington state.

The shares of meat processors Tyson Foods and SmithField Foods also got punished.

In futures markets in Chicago, cattle futures contracts fell their daily limit of 1-1/2 cents a pound when trading opened.

After the discovery was announced late Tuesday, U.S. officials insisted the food supply was safe.

But the impact on the nation's cattle industry was evident almost immediately:

Several nations, including Chile, Mexico, Japan, South Korea and Taiwan, halted U.S. beef imports within hours after the announcement that a cow at a farm near Yakima, Wash., southeast of Seattle, had tested positive for the brain-wasting disease.

Japan is the largest overseas market for U.S. beef.

The farm where the cow originated has been quarantined and officials were tracing the movement of the cow from the farm to the slaughterhouse, and the flow of the meat to three processing plants in Washington state.

The processor, Verns Moses Lake Meats has voluntarily recalled 10,410 pounds of raw beef because of concerns the products may contain meat tainted with the disease, the Agriculture Department said Wednesday.

The cow that was apparently infected came from a dairy farm with 4,000 cows, Secretary Veneman said Wednesday. She told reporters the farm was part of a "large dairy operation."

The raw beef products from the Moses Lake, Wash.-based company "may have been exposed to tissues containing the infectious agent that causes bovine spongiform encephalopathy (BSE)," the scientific name for mad cow disease, the department said in its announcement.

Officials said once they determine where meat cuts from the sick animal were taken, they will decide if a wider beef recall is warranted. Officials believe that meat went through at least two processing plants, and Veneman said an investigation is under way to determine if any had reached store shelves.

"One important thing to remember is that muscle cuts of meat have almost no risk," Veneman told CNN, emphasizing that the disease is typically spread by consumption of brain or nerve tissue, which did not enter the food system.

"I know of no science to show that you can transmit BSE from muscle cuts of meat," she said.

The impact on restaurant stocks may be brief as long as the disease is contained quickly, Oppenheimer & Co. restaurant analyst Mike Smith said.

"I think we'll see some sort of knee-jerk reaction, but it depends on how long this remains a news item," Smith told Reuters news agency. "You could have some impact maybe until the end of January."

But David Palmer at UBS saw things differently.

"We believe that the likely impact from this case of mad cow will be positive -- not negative -- for our restaurant names," Palmer wrote in a note to investors Wednesday.

He said negative publicity is likely to be brief and that beef prices would fall, which could eventually help hamburger chains.

McDonald's has been hurt before by a consumer backlash in both Europe and Japan after they reported mad cow disease.

Mad cow disease decimated the European cattle industry in the 1990s, where its human variant, Creutzfeldt-Jacob disease, has been linked to more than 100 deaths.

"It is a big deal," said Joe Kropf, livestock analyst with Kropf and Love Consulting. "Consumers cut back on consumption and countries, for safety reasons, embargo beef from affected countries.

In Chicago, cattle futures dropped the daily limit of 1.5 cents a pound amid fears the first reported case of mad cow disease in the United States will hurt domestic beef sales, shut off beef exports and create a glut of supply.

Bans were placed on Canadian cattle and beef by importing countries, including the United States, after a mad cow case there earlier this year.

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