SEC. MIKE JOHANNS: Thank you very much, and good afternoon everyone, and thank you for joining us. I will begin today with an announcement about the National Animal Identification System, and then what I'd like to do from there is ask Dr. John Clifford to report on the conclusion of the investigation related to the cow that tested positive for BSE in June of this year.

Many of you have heard me say before that I am deeply committed to the spirit of public service that involves listening, really listening, to the people whom we serve. We may not always agree with each other, but as public servants it is important that we listen. That's why I've been traveling around the country doing a Farm Bill listening tour to hear from the entire ag community about what's on their mind, what we're doing right, and what we might do better.

Well, today I'd like to tell you about some of the listening we've done on the National Animal Identification System. That's a good place for me to start. The system is one of the most important infrastructure initiatives in animal agriculture today. Our goal is to work hand-in-hand with producers and the states to enhance our collective ability to quickly identify animals that may be of concern in a disease outbreak.

When this system is fully implemented, we expect to be able to identify all potentially affected animals and premises within 48 hours of a disease detection.

You'd be hard-pressed to find anyone working in animal agriculture today who doesn't believe that's a worthy objective and an important investment for us to make. After all, the faster we identify affected animals and premises, the faster we are able to contain the disease.

But as with any major initiative touching so many segments of the industry, there are differing views on some pretty fundamental questions like whether data in the system should be publicly or privately held, how can we protect confidentiality of the data, and whether the data collection should be a voluntary system or a mandatory system.

Last year the USDA held a series of listening sessions around the country, some 16 in all as a matter of fact, to hear what folks around the country had to say. We also formed a special subcommittee under the Secretary's Advisory Committee on Foreign Animal and Poultry Diseases that has widespread producer representation.

And in May as you know we published a detailed thinking paper outlining our proposed strategy for getting a mandatory system in place and framing some additional questions for stakeholders to contemplate.

In their responses, producers expressed concern about confidentiality when it comes to animal movement information. Without question, the participation of producers is absolutely essential to the success of an animal identification system. That's why we paid attention when producers asked that animal movement data be privately held.

Based on the feedback, I'm putting forth guiding principles today that allow animal movement data to be maintained in a private system that can be readily accessed when necessary by state and federal animal health authorities. This allows the industry to continue developing databases that house animal movement information, and we envision those databases feeding a single, privately-held animal tracking repository that we can access.

This initiative, or innovative approach, addresses producers' concerns while at the same time enabling federal and state officials to access information that we may need for disease control purposes.

There are a number of concepts being discussed in the private sector about how this should work and how it should be funded. USDA is not favoring any one of them over the other. USDA will be scheduling a stakeholder meeting this fall to clarify expectations for the private tracking system and discuss user requirements in system specifications.

In the meantime, USDA will be finalizing and releasing the program standards that were presented in the thinking paper. Beyond that, we will be looking to industry to come together to drive this leg of the journey.

I believe strongly this is the right approach. This system has always been about government and private partnership. USDA has invested a great deal, nearly $19 million in 2004, to get the infrastructure started. Most of that went to cooperative agreements with states and with tribes. For Fiscal Year 2005, we've invested another $33 million with about half of that going to additional cooperative agreements. And there's another $33 million in the President's 2006 Budget for additional infrastructure building.

We are making great progress in the area of premise registration with 100,000 premises now registered and plans to begin later this year allocating blocks of animal identification numbers to tag manufacturers.

With today's announcement, we begin work on the next step in developing the animal identification system, tracking animal movements. The only way the system will work is if stakeholders have a role in designing it, if all are truly, fully invested. The piece of the system that is the most producer-dependent is this piece dealing with tracking animal movements, and so it simply makes good sense for producers to design and to maintain that piece of the system.

Ultimately we know we will end up with a system that embodies the best that the private system and government have to offer.

I would be happy to answer your questions about the National Animal Identification System in just a moment.

But just briefly while we're speaking of tracing animals, I did want to mention that we've completed our epidemiological investigation related to the BSE animal identified in June. This very thorough investigation has been a tremendous example of partnership at the federal, state, and, I might add, the industry level. And we appreciate that.

It's worth nothing that this investigation would have taken far less than two months if we had the National Animal Identification System in place. That delay is not significant in terms of human or animal health because BSE is not a contagious disease. But the time it has taken to identify, locate, and test animals of interest is significant to our efforts to reopen export markets, because a number of trading partners have been reluctant to make decisions until the investigation is complete.

I am pleased that we are now in a position to close the investigation, communicate this information to our trading partners, and then move forward. I have with me today Dr. John Clifford, our chief veterinarian, along with Dr. Steve Sundlof of the Food and Drug Administration, to provide you with information about their conclusions. So I'll now turn the microphone to Dr. Clifford.

DR. JOHN CLIFFORD: Thank you, Mr. Secretary. As you said, the announcement of the guiding principles for the future of a public/private partnership for animal ID is a giant step forward for a national animal identification system. Because it was developed through the integration of premises registration, animal registration, and animal tracking, the NAIS has always been viewed as a government/industry partnership. Today's announcement affirms our commitment and eagerness to work with the industry to achieve the goals of the NAIS.

Now I want to turn to the completion of the epidemiological investigation that was conducted following the BSE detection in Texas in June. Many people worked very hard on the investigation, and I'd like to thank the Veterinary Services employees involved, our colleagues from the Food and Drug Administration, the owners of the animals, along with the Texas Animal Health Commission and the Texas Feed and Fertilizer Control Service for their outstanding work.

This investigation is another great example of federal, state, and local partners cooperating to help protect livestock health in this country.

I'll now summarize our findings. Our results indicate that the positive animal, called the "index animal." was born and raised on a ranch, termed the "index farm," in Texas. It was a cream-colored Brahma cross, approximately 12 years of age at the time of its death. It was born prior to the implementation of FDA's mandatory ruminant-to-ruminant feed ban in the U.S., and that ban was implemented in August 1997.

The animal was sold through a livestock sale in November of 2004 and transported to a packing plant. The animal was dead upon arrival. The animal was therefore refused by the packing plant. This refusal was consistent with USDA's safeguards to protect the meat supply from BSE.

The animal was then shipped to a pet food plant where it was sampled for BSE. The plant did not use the animal in its product, and the carcass was destroyed.

APHIS's epidemiological investigation attempted to trace all adult animals that left the index farm after 1990. The investigation also attempted to trace all progeny born within two years of the index animal's death.

Together these animals are called "animals of interest." These steps are consistent with the guidance for epidemiological investigations and to detections of BSE issued by the International Animal Health governing body or the OIE.

During the course of this investigation, USDA removed and tested a total of 67 animals of interest from the farm where the index animal's herd originated. All of these animals tested negative for BSE.

A total of 200 additional adult animals of interest were determined to have left the index farm. Of these 200, APHIS determined that 143 animals were slaughtered, 2 animals were found alive but one was determined not to be of interest because of its age, and the other tested negative for BSE. 34 animals were presumed dead, 1 is known dead, and the remaining 20 are classified as "untraceable."

In addition to the adult animals, we also looked for two calves born to the index animal. Due to record-keeping and identification issues, we had to trace 213 calves. Of these 213, 208 entered feeding and slaughter channels, 4 are presumed to have entered feeding and slaughter channels, and 1 calf was untraceable.

As you know, BSE is not a contagious animal disease. This disease is spread through contaminated feed. To determine whether contaminated feed could have played a role in the index animal's infection, FDA and the Texas Feed and Fertilizer Control Service conducted a thorough feed investigation.

For a summary of the findings of the feed investigation, we have Dr. Steve Sundlof here from the FDA.

Before I turn things over, though, I will say that we are extremely pleased with the results of the epidemiological investigation. It shows there was no widespread problem associated with the index herd, and as you will hear more about in a moment, that the ruminant feed ban in the United States is solid. It also affirms that USDA's interlocking system of safeguards to prevent BSE from entering the food chain is working as it should.

We remain vigilant, as well, as in our efforts to determine the prevalence of BSE in the United States. To date there have been only 2 BSE-positive animals found in this country in more than 452,000 animals tested in the last 14 months.

All evidence is that the prevalence is extremely low and continues to decline given the length of time the ruminant feed ban has been in effect.

With that, I will turn things over to Dr. Steve Sundlof from the Food and Drug Administration.

DR. STEVE SUNDLOF: Thank you, Dr. Clifford. I will read an opening statement as well.

On June 24, 2005, the USDA informed the FDA that a cow in Texas tested positive for bovine spongiform encephalopathy. The animal was disposed of by incineration and did not enter the human food or animal feed chains. Although the animal posed no risk to the animal feed supply, FDA, along with USDA's Animal and Plant Health Inspection Service, the Texas Animal Health Commission, and the Texas Feed and Fertilizer Control Service conducted a feed investigation with two main objectives.

The first objective was to identify all protein sources in the animal's feed history that could potentially have been the source of the BSE agent.

The second objective was to verify that cattle of interest leaving the herd after 1997 were rendered at facilities that were in compliance with the 1997 regulation that prohibits most mammalian protein in the feed for ruminants, which hereafter we will call the BSE Ruminant Feed Rule.

The feed history investigation identified 21 products that had been used on the farm since 1990. These feed products were purchased from three retail feedstores and had been manufactured at nine different feed mills.

The investigators visited these establishments to collect information on formulation, shipping invoices, and the use of ruminant meat and bonemeal on the premises, both before the 1997 feed ban and after the 1997 feed ban.

This investigation found no feed products used on the farm since 1997 had been formulated to contain prohibited mammalian protein. The investigation identified one feed which contained an animal protein source that could not be identified and the investigation also found one feed mill that supplied feed to the farm and that used ruminant meat and bonemeal in feed formulations for nonruminant species after the BSE ruminant feed rule went into effect, and this was permitted under the rule.

And there were several feed mills that had used ruminant meat and bonemeal prior to the 1997 feed ban but had ceased to use that material after the 1997 feed ban.

The investigation into the disposition of herd-mates from this farm involved visits to nine slaughter plants and eight rendering plants. The investigation found that all rendering plants were operating in compliance with the BSE ruminant feed rule. A review of the inspection history of each of these rendering firms found no violation.

And those are my prepared comments.

SEC. JOHANNS: Very good. Thank you, both of you. And with that I think we're ready to open it up to some questions.

OPERATOR: Thank you. If you have a question you can do so by pressing *1 on your touchtone phone. Anytime you wish to cancel your question you can do so by pressing *2. Please be mindful to record your name as well as your affiliation when announced.

First question comes from Libby Quaid.

REPORTER: Hi. Thank you. A question for Dr. Sundlof with FDA. Your agency promised more than a year and a half ago to close loopholes in the feed ban. When will FDA act on that promise, and what will FDA do to close the loopholes?

DR. SUNDLOF: Thank you. Yes, we have been working on the proposed rule. We announced July 14 of 2004, in an advanced notice of proposed rulemaking, that we intended to move forward with a modification of the feed rule that would prohibit specified risk materials in all animal feeds. I can report that there's been quite a great deal of progress on that, and that we hope that a rule will be forthcoming within the next month or two.

REPORTER: Can you say what that rule will entail? Will it be different from what the ANPR was?

DR. SUNDLOF: It will -- well, the ANPR dealt with a whole lot of issues. And so I can't say it will be different, but I think you'll find it's consistent with what we announced in the ANPR.

MR. JIM ROGERS: Next question, please?

OPERATOR: Next question comes from Daniel Goldstein of Bloomberg News.

REPORTER: Yeah, hi. This question is for the Secretary. Last month or earlier this month the USDA released about 1,000 incidents where there was a case of meat plants not following the rules or violations for specified risk materials. And you spoke of some reluctance on the part of trading partners to reopen trade while there was a BSE investigation happening.

Has there been any reluctance on the part of these trading partners to reopen because of some of these violations?

SEC. JOHANNS: There hasn't been. They've asked for information. We supply that information, we answer whatever questions they have. There's an interest in it, I can say that, but I haven't had any trading partner say, 'We're not going to open the border,' or 'We're considering closing the border if they've opened it already.'

So at least at this stage it's been more of a situation where they were interested and we provided the information.

MR. ROGERS: Next question, please?

OPERATOR: Next question comes from Ron Hays of Clear Channel.

REPORTER: Yes. I guess my question is regards to some of the comments that have been made by the Japanese in recent days, Japanese Food Safety Commission. Seemingly some of their panel members questioning our feed ban and saying they're fearful that we might have as "bad of a situation as they had in Britain" is one quote we saw from the Japanese media. You know. Can anybody address-- what assurances can we make to them and to folks in this country that we are effective on our feed ban and right across the board?

SEC. JOHANNS: I'll ask Dr. Sundlof to address that in just a second, but I would just offer a thought.

That's just simply not the case. I mean, it just simply is not, not the case. We've worked very intensely, as you know, with the Japanese over many, many months now to deal with their questions and to address whatever concerns they raised. With the Japanese we've even gone beyond what international rules require. We agreed that we would start trading with animals at 20 months and under, and even the international standards don't require that.

In 452,000 animals tested in the last 14 months we've had two BSE-positive animals. So again, we'll respectfully address their question, but quite honestly I don't see any scientific basis for the issue they're raising.

Doctor, you can offer a thought if you would.

DR. SUNDLOF: Thank you, Mr. Secretary.

Well, let me just say that we've had a very effective feed ban in place since 1997. It's been over eight years now this month. And we have really focused our efforts on enforcing the ban and making sure that compliance with the feed ban was high.

And we reported on several occasions that compliance when we go out and investigate -- we did over 6,800 inspections in the last year and are projecting to do even more in the upcoming years -- that their physical inspections, where inspectors go out and do a physical examination of the feed plants or the renderers, in all cases we find the compliance by the industries affected is greater than 99 percent. So it's an extremely high compliance rate. It's hard to get any better than that.

The fact that both of these cattle that were BSE-positive in the United States were born at or before the feed ban and probably very likely consumed contaminated feed well before 1997-- there's just no indication the feed rule is not effective.

MR. ROGERS: Our next question, please?

OPERATOR: Next question comes from Steve Kay of Cattle Buyers Weekly.

REPORTER: Gentlemen, I want to go back to the proposed rule by AFDA because the question of Ron Hayes mentioned what members of Japan's Prion Subcommittee were referring to in part, and one of their concerns that we were still, we the U.S. are still allowing meat and bonemeal to be fed to nonruminants.

Now the advanced notice by FDA Dr. Sundlof suggests or proposes a ban on SRMs from all animal feed. Can you tell me, if you proceed with that, is that going to satisfy Japan, do you think? How is USDA going to convey to Japan that we might be moving in this way, because if this rule becomes a final rule but doesn't take effect for another year or more is Japan going to say, Well, we'll reopen our border in a year when this takes effect? I mean, how is all this going to play out?

SEC. JOHANNS: Well, I'll offer another thought and then Dr. Sundlof, I'd ask you to offer your thoughts.

Japan would not be justified under any science, any view of the world, to adopt that viewpoint. Again I point out with Japan we at the USDA, actually before I arrived, but made a decision to agree with Japan that we would start with the trade of animals 20 months and under.

In the history of the world we haven't found an animal that tested positive for BSE 20 months and under. They just simply have no risk here. So that approach would not be justified by international standards, it would not be justified by scientific standards. It really is time for Japan, in my opinion, to step up here and go through a science-based process and reopen the border, and hopefully we're nearing the end of that very kind of process.

Doctor, any thoughts?

DR. SUNDLOF: Thank you again, Mr. Secretary. I don't have the insight to know what the Japanese government is going to do, based on what the feed rule or the proposed feed rule will convey. But the rule is very much risk-based. It uses the Harvard Risk Assessment to actually quantitate the risk and the risk reduction of the proposed measures that we will be publishing soon. And so I would agree with the Secretary that on the basis of science, the science is clearly laid out in the proposed rule and under a risk assessment that has undergone significant peer review by the scientific community.

So I think if the decisions are going to be based in science then I think we will have a very defensible position.

MR. ROGERS: Next question, please.

OPERATOR: Next question comes come from Kerry Young of Bloomberg.

REPORTER: Hi. I just had a question on why it's taking so long to get the revised feed ban out there.

SEC. JOHANNS: Dr. Sundlof, if you could address that?

DR. SUNDLOF: Okay, thank you again. Well, one of the reasons was -- there's actually a number of reasons. Back in January 2004 when, within a month after the first case in the U.S. was reported, the Secretary of Health and Human Services at that point made a statement that the FDA would propose modifications to the feed rule that would eliminate plate waste, poultry litter, cattle blood and require that all facilities that manufacture with ruminant meat and bonemeal be dedicated to non-ruminants and not prepare any ruminant feed in those mills.

Within a week after the Secretary's announcement, the International Review Team that was advisory to the Secretary of Agriculture made recommendations that were very much different than that which the Secretary had announced the week prior. Based on that, we decided at that point to go through an advanced notice of proposed rulemaking to get all the information out, all the recommendations that the International Review Team has made, and discuss those from a risk basis.

And as a result of that, we are now into rulemaking.

One other thing that was a reason for the delay is that during this time USDA was in the middle of their intense surveillance activity to try and determine the prevalence of BSE in U.S. cattle. And that was done, the questions that were before us were--the International Review Team based their recommendations on assumptions that there was significant infectivity in the U.S. cattle herd. The results of the USDA surveillance tend to cast doubt on that assumption, and so it had a major effect on which was the correct regulation or what were the correct measures that would be commensurate with the real risk?

So those are some of the reasons it has been delayed. It's a complicated regulation. It involves a lot of material that will have to be disposed of in some environmentally friendly way, and so we have to be very thoughtful about how we propose a rule that has minimal environmental impacts but yet does the greatest amount to reduce the actual risk to BSE in cattle.

SEC. JOHANNS: If I could just add something that obviously is very, very relevant and very important. Again, that's to point out that in the last 14 months we've tested 452,000 high-risk animals. These are the animals, that present themselves for testing, that experience would show from other countries would have the highest chance of being a BSE situation. We've had two out of that identify as positive. And both of those animals were born before the feed ban.

So it's obviously the decision, some years ago now, to impose the first generation of feed ban was the right decision.

MR. ROGERS: Next question, please.

OPERATOR: Next question comes from Sally Schuff from Feedstuffs.

REPORTER: Yes. This is Sally Schuff at Feedstuffs. Thank you for taking the question.

The question is a two-part question for Dr. Clifford and Dr. Sundlof. Dr. Clifford, you said when the second case was announced the test results were more similar to the Western blot test, was more similar to results found in France than in the United Kingdom, leading to some question about what strain of BSE she might have. My question to you is, has that been resolved yet? Do you have any more positive identification on the strain?

My question for Dr. Sundlof is, have you identified the source of the meat and bonemeal that was fed prior to the feed ban? Was it domestic or imported?

DR. CLIFFORD: This is John Clifford. I'll answer the first part. From a regulatory standpoint, this is a case of BSE. Looking from a molecular standpoint, there's further work that's being done internationally on some of these cases. And--but from our standpoint, this is a case of traditional BSE that we would find. So that's the way we're approaching this.

OPERATOR: Next question comes from Karen Robinson of Dallas Morning News.

REPORTER: Hello, this is Karen Robinson Jacobs with the Dallas Morning News. I wanted to go back to the Texas cow, and if you could tell us maybe a little more slowly how much cattle or meat from this particular index ranch got into the human food chain, how much got into the pet food chain, and how concerned should consumers be that they may have eaten something already before the test even began?

DR. CLIFFORD: This is John Clifford. I'd begin by saying if you look at what we know internationally, it's not very common at all. In fact it's rare to have more than one single case of BSE found within a herd. So from that standpoint alone, the risk is extremely small. In addition you have other safeguards in place. We have had a feed ban in place since 1997. It's been in place for 8 years, and then there's other cross-cutting protections as well from the food safety side that Dr. Ken Peterson's on if he wants to address as well.

But as far as actual poundage, I don't think it's possible for us to give you that actual number. There was two calves of interest that we traced. Due to the lack of appropriate records at the time, we actually traced 213 calves. Of those, it's estimated that 212 of those animals went into the feeding and slaughter channels. Those animals would have been slaughtered likely prior to 30 months of age, which we know that it's extremely small risk of having BSE prior to 30 months of age.

And also internationally and in the research community, while it's never been proven that offspring can get this disease through maternal transmission -- it's never been proven or disproven actually -- but it's thought very much from the international experts and the research it is extremely rare if it does happen.

Both of these calves were born very well prior to this animal being slaughtered. This animal did not show any clinical signs typical of BSE -- sampled and destroyed. This animal did not show any clinical signs or evidence of BSE which would make it even more unlikely that these two offspring would have any risk of having BSE.

The other 200 head that were traced were retraced as a result also of a lack of records. We were looking at cattle of interest over a five-year period of time of which this animal was born. Her approximate age was 12. We expanded one year of that and made her 11 to 13, and then we'd go another year beyond that. So we looked at animals basically in the age range of 10 to 15 years of age to remove those from the herd. And we traced every adult animal that we could from 1990.

Many of those animals would not even be of concern because they would not have received any feed at the time that she was in the herd or would have not been a birth cohort and born at the same time that she was.

So of those, 143 were reported as slaughtered, and we confirmed that 131 were definitely slaughtered; 34 were presumed dead, and 20 of those were untraceable. So again, we feel that the risk is extremely small. We do not feel that the public or our pet food industry should have any concerns relative to this issue.

MR. ROGERS: Next question, please.

OPERATOR: Next question comes from Chuck Abbott of Reuters.

REPORTER: Good afternoon. I'm curious -- what, Mr. Secretary, what you're going to do about the downer ban which is still now a preliminary rather than a permanent rule. When will you decide on the downer ban? How sweeping will it be? And what's going to happen to the surveillance testing program? It has run some months beyond its originally envisioned lifetime. I'll stop there.

SEC. JOHANNS: The surveillance program, as you know, was really open-ended. So I might debate with you a little bit on your last thought there. But here's what I would say. I am not prepared to bring the surveillance program to a conclusion, have not made a final decision on the downer ban. As you know, we've started now with the testing of the 20,000 healthy animals. We hope to have that done in the next 60 days.

Dating from the time of my confirmation hearing really until now, my view was to get the surveillance program in the kind of shape that we wanted, make sure that we'd touched all the bases. And then, in addition to that, do the additional testing of the 20,000 healthy animals and then, once we have all the information together, make a decision on some of those pending issues.

So that's where it's at.

MR. ROGERS: All right. I'd like to thank everyone for calling today. If you have further questions for the U.S. Department of Agriculture, you can call me, Jim Rogers, at 202-690-4755. If you have questions for the Food and Drug Administration, please contact my counterpart Ray Jones at 301-827-6246. This concludes the call for today, and I thank you all for participating.