* Merck suspends sales of growth additive in U.S., Canada
* FDA working with Merck to study growth enhancer
* Cattle feeders to turn to less-potent beta-agonists
By Theopolis Waters and Tom Polansek
CHICAGO, Aug 16 U.S. drugmaker Merck & Co
said on Friday it is suspending sales of its Zilmax
animal feed additive in the United States and Canada following
concerns about animals showing signs of distress after use of
the product, which is given to cattle to increase their weight
Zilmax has been the focus of attention in the livestock
industry since Tyson Foods Inc announced last week it
will no longer accept Zilmax-fed cattle for slaughter.
Chicago Mercantile Exchange cattle futures rose
Friday on expectations that a cutback in Zilmax use could trim
the supply of beef beginning this fall, although producers said
they did not expect major changes.
Reuters reported earlier this week that a second major meat
packer, JBS USA, at a cattle industry conference had presented a
video from a JBS plant showing cattle having difficulty walking
after they were fed beta-agonist drugs, additives that speed
weight gain in animals. Zilmax is the leading
commercial brand of beta-agonist.
In an interview with Reuters on Friday, Merck said no safety
issues had been discovered in 30 studies since the product was
introduced in the United States in 2007.
Merck said on Friday it remains confident in the safety of
the product, which had sales of $159 million last year in the
United States and Canada. But the company added it will conduct
an audit of how it is used "from the feedyard to the packing
plant." The product is sold by Merck's animal health unit.
Merck said its decision to suspend sales will allow the
company time to implement its plan announced on Tuesday to
establish study protocols, identify feeders and packers to
participate in its audit while creating a third-party team to
oversee the process and validate its results.
Also on Friday, the U.S. Food and Drug Administration said
it was working with Merck and the U.S. Department of Agriculture
to gather information on Zilmax and determine if it poses a
Livestock analysts said they were surprised by Merck's
decision because the company's earlier move to address concerns
about Zilmax had not included a sales halt.
"They laid out a strategy in the last few days that did not
include suspension," said Jim Robb, director of the Livestock
Marketing Information Center.
The halt in sales will not cause a major disruption in North
American beef production if producers switch to Optaflexx, a
less-potent growth promoter sold by Eli Lilly and Co's
Elanco animal health unit, Robb said.
Prices for CME live cattle to be delivered in late
winter 2013 and spring 2014 had been down Friday morning before
the Merck announcement and then rebounded after the news.
Investors bought based on a belief that cattle brought to
slaughter without feeding on Zilmax would have lower body
weight, resulting in less beef and higher prices, traders said.
'WAIT AND SEE'
One of Tyson's rivals, Cargill Inc, the country's
third-largest meat producer, called Merck's decision to halt
sales "prudent" and said it reflects a "thorough assessment of
"While Cargill has not experienced some of the cattle
wellbeing issues others have, we support Merck's decision,"
Cargill spokesman Mike Martin said. Cargill will continue to buy
cattle fed Optaflexx, he added.
Major beef packers National Beef and JBS USA could not
immediately be reached for comment.
UNDER THE MICROSCOPE
The use of Zilmax drew increased scrutiny after Tyson on
Aug. 7 said it would stop purchases of cattle fed the popular
feed additive after some animals arrived at its packing plants
having difficulty walking or moving.
Tyson, the country's biggest meat processor, said it does
not know what was behind the animals' behavior, but company
executives said that animal health experts have suggested that
the use of Zilmax may be a cause.
In response to Merck's suspension of Zilmax, Tyson spokesman
Gary Mickelson said: "We appreciate Merck's decision and will
continue to monitor this issue. We'll also continue to seek
input from our Animal Well-Being Advisory Panel as well as other
independent animal health and welfare experts."
MERCK DEFENDS PRODUCT
Following Tyson's decision to stop buying cattle fed with
Zilmax, Merck defended its product. The drug company said in a
statement on Friday that tests have proven that Zilmax is safe.
Merck also said it was working with Tyson to resolve questions
about the drug.
Merck shares closed down 0.6 percent at $47.70 on Friday on
the New York Stock Exchange.
The halt of Zilmax sales may translate into a 1 percent drop
in U.S. beef production, said Rich Nelson, chief strategist for
commodities brokerage firm Allendale Inc.
Feedlots will shift to rival additive Optaflexx from Zilmax
because they still want to add weight to their animals, Nelson
Optaflexx is less effective at adding weight to animals than
Zilmax, according to producers.
Merck's decision to suspend Zilmax sales raises cattle
producer Charlie Coblentz's hopes for bigger profit.
Coblentz does not use beta-agonists in his Oklahoma feeder
operation because he does not raise cattle to the their
finishing weights - the last few weeks before slaughter, when
doses of Zilmax or Optaflexx help cattle add weight. However,
increased prices for fully grown cattle will have an effect on
all cattle prices, even the younger animals Coblentz raises on
his Oklahoma operation, he said.
"If everybody would take that out and cattle aren't able to
gain as easily as they are now, the price of beef is going to go
higher," said Coblentz. "That was my first thought."