The BSE crisis meant beef producers like Aberdeenshire farmer Peter McKilligan met their pain barrier earlier than those in other sectors.

Three years on, the survivors can see signs of hope for the future despite continuing problems over profitability.

Everyone looks to the rebuilding of export markets, especially in Europe, but so far the Scottish meat industry is unwilling to take the commercial gamble needed to re-establish a trade that once absorbed 25% of the country's quality beef production.

Mr McKilligan is a specialist, "finishing" 550 cattle a year on his farm outside Turriff. He buys 15-month-old beef calves from Scottish hill farms, feeds them up and delivers them direct to his local abattoir at about two years old.

Suffering badly

Peter McKilligan believes people still want his product

Finishers like him suffered particularly badly after Douglas Hogg's BSE announcement of March 1996 when demand for beef stopped dead in its tracks.

For the next 18 months the market was a roller coaster ride as consumers reacted to each twist and turn of the crisis.

Before March 1996, Peter was selling cattle at about £860 a head, afterwards they dropped to below £600. Today , with UK beef consumption close to pre-BSE levels, his prices are nearer £700.

But this is no return to the status quo. The crisis has caused a dramatic shake up in the structure of the beef sector, both among producers and processors. Driving it all has been the cost of the rangee of measures taken to reassure consumers and the European Commission.

Increased costs

Parts of the animal which before the BSE and e-coli scares had a market value now carry a disposal charge, while the number of inspectors and monitors has mushroomed.

Industry estimates suggest it has raised costs by at least £100 an animal, most of which cannot be passed on to the retailer and most of which foreign competitors do not face.

Nevertheless, Scottish meat processors have built a strong UK market, achieving better prices than their English competitors, based on a reputation for quality and comparatively low incidence of BSE.

But the British market is crowded and swamped with imports made cheaper by the strength of sterling so to have any sustainable future Scotland's comparatively tiny meat industry must aim for luxury markets around the world.

So far, even the lifting of the EU export ban has done little to bring that nearer.

Under the scheme, meat for export must be prepared separately, in dedicated plants with yet another layer of inspections and checks, including the need to guarantee the mother of any stock slaughtered was alive six months after it was born.

That is possible but no easy task for a farmer like Peter McKilligan whose cattle are bought from Shetland to Stranraer.

The challenge

So far, Scottish meat companies have ducked the challenge - knowing full well that the initial volumes of meat exported will be negligible, their product unduly expensive and their capacity to subsidise the initial losses questionable after the last three years of turmoil.

There are moves to achieve export status but so far only one Cornish plant has taken the plunge.

Peter McKilligan believes people still want good beef and that he can produce it. What he is less sure about is how many farmers like him will be left by the time the present problems afflicting the industry have been resolved.