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As European supplies dwindle, byproduct shortages hit array of goods

FRANKFURT, Germany (AP) - Fruit chews pulled from store shelves in Poland. Price hikes for Italian shoes and French handbags. Animal fat abandoned by global makers of face cream and soap.

Europe's effort to rein in its bout of livestock disease isn't just hammering world supplies of lamb chops and prime rib. It's starting to hit the 40 percent of a cow, pig or sheep that never makes it to a store refrigerator shelf.

Consumers around the world may soon develop a newfound appreciation for these uneaten animal parts, which are skinned, ground up or melted down into ingredients used every day in a dizzying array of goods.

With fewer animals slaughtered in Europe due to fears of eating meat, hide prices are soaring. Shoppers could pay more for this summer's lineup of items like leather furniture, high-end car seats, clothing and shoes.

Costs also are rising for tallow, or animal fat, which is used in candles, soap and beauty products _ though consumer prices appear unaffected for now as manufacturers absorb higher costs or use substitute ingredients.

European suppliers of meat byproducts, meanwhile, face millions of dollars in losses.

``Our byproduct industry has taken a hammering,'' said Martin Grantley-Smith at Britain's Meat and Livestock Commission. ``In straight exports, Britain will be losing millions of dollars a year in terms of byproducts.''

British slaughterhouses used to get 5 pounds (dlrs 7.25) per ton of byproduct material from companies eager to turn it into tallow, leather or bone meal. But with a host of new restrictions against using those parts, slaughterhouses are now having to pay up to 90.5 pounds (dlrs 130) a ton to have it hauled away.

Bans imposed by nations around the world because of mad-cow and foot-and-mouth diseases have halted 94 percent of the European Union's beef exports and 73 percent of its pork exports. They also have slowed Europe's weekly livestock slaughter from a half million head to just 350,000 head, according to Hidenet.com, an Internet market report.

Restraints on using nonedible beef byproducts have been around since the mad-cow outbreak in the mid-1990s. But a mad-cow scare that peaked in the fall and the current food-and-mouth crisis have led countries to fortify or extend those laws.

Europe is trying to halt the spread of foot-and-mouth disease, which unlike mad-cow poses no human health threat, by incinerating the animals, hides, hooves, bones, fat and all.

Europe's mass culls have torpedoed the local supply of leather, by as much as 75 percent in Britain, and have lifted the price of local leather by about 20 percent. Worldwide, the supply squeeze has pushed up cowhide prices 15 percent in the last two months, Hidenet.com reported.

The market claimed its first U.S. victim last month when Irving Tanning Co., a small 390-employee firm in Hartland, Maine, filed for bankruptcy protection.

Irving Tanning doesn't buy European hides, but vice president Paul Larochelle said the company was pinched by a blitz of overseas demand for U.S. skins that pushed stateside prices up 66 percent.

``You can only absorb so much before you have to turn around and say, 'Enough is enough,''' Larochelle said.

To counteract tight demand, the European Footwear Confederation has petitioned the European Union to order member countries to remove pelts and skins before animals are destroyed.

But what's a crisis to one region is often an opportunity to another.

Increased European demand for leather is fueling a mini-boom in Brazil, where ranchers are boosting their 2001 export forecast to 1.83 billion reals (dlrs 850 million) from an earlier prediction of 1.61 billion reals (dlrs 750 million), says Jose Roberto Scarabel, president of the Brazilian Tannery Industries Center.

U.S. hide exports shot up 25 percent to dlrs 2 billion last year after the mad-cow scare struck, according to Leather Industries of America, another trade group. And January exports were 12 percent ahead of last January's.

In other byproduct markets, the impact is less direct.

About 12 percent of an animal is usually ground down and melted to make tallow. The animal fat is widely used in consumer and industrial goods despite a shift to substitutes in the mid-1990s by makers of cosmetics and other products seeking to address health concerns raised in earlier mad-cow scares.

But the current outbreak has forced countries such as Japan to institute full-fledged bans against animal products in such consumer goods.

That has ramifications in Europe for companies like Cognis, a Netherlands-based chemical company that makes raw ingredients for body care products as well as industrial lubricants.

Just a few years ago, it used animal tallow in nearly half of its cosmetics. Today, virtually none of its health care line uses animal products, although tallow still accounts for 20 percent of its industrial chemicals.

Cognis calculates it costs 10 percent more to make vegetable-based products. But the shift may be paying off, because tallow prices have spiked in the last month as European restrictions crimp supplies.

``If foot-and-mouth disease lasts for one or two years, we could see a possible increase. But right now, it's really just a short-term phenomenon,'' said Albert Strube, one of the Cognis' top chemists.

At the same time, German cosmetics giant Welle AG, maker of Ultrasheen hair care products, has tripled its research budget to find plant-based alternatives to tallow _ in part because consumers scrutinize ingredients more carefully than they used to.

Gelatin, derived from ground bone and cartilage, is a common ingredient in yogurt, soft cheese, medicine capsules and jelly. It's also used in candy, which it makes soft and chewy. Recently, the German makers of the Mamba fruit chew pulled them off supermarket shelves in Poland when customs officials said they posed a possible health risk.

British candy maker Cadbury hopes to avoid a similar fate by importing its gelatin from South America, where the mad-cow risk is lower. Kurt Bohlen, general manager of Leiner Davis Gelatin, Latin America's largest gelatin producer, expects Brazilian exports to jump 10 percent this year.

Meanwhile, German candy giant Haribo, inventor of the gummi bear, is taking a different tact. Just last month, it rolled out its first batch of gelatin-free gummi candies, a new product that gets around similar beef bans in countries like Malaysia and Singapore.

The situation could ease as foot-and-mouth disease comes under control. As the continent slowly turns the tide against the outbreak, European Union agriculture ministers met this past week to discuss broadening limited immunization programs already authorized in the worst hit areas of Britain and the Netherlands.

A turn for the worse could be foot-and-mouth disease finally hitting U.S. shores. The last U.S. outbreak occurred in 1929, and the leather industry says it could prove disastrous for the nation's 98 million head of cattle.

``If we get it here, heaven forbid, there's no telling where prices could settle,'' said Charles Myers, president of Leather Industries of America. ``I just hope and pray it doesn't come this way.''

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-- Martin Thompson (mthom1927@aol.com), April 15, 2001