By Mike Sanders BBC News

But many believe the industry can overcome the problem.

The BSE crisis has affected exports of US beef

It had looked like being a good Christmas for American cattle ranchers.

Several lean years had forced so many out of business that there was a shortage of beef.

Increasing demand, fuelled by the meat-heavy Atkins diet, had driven prices up by 50% in one year.

Then came the discovery of the infected cow in Washington state. More than 30 countries halted imports of US beef.

Ships carrying some 40,000 tonnes of it had to turn back.

Prices fell by at least 50% per cent, and shares in major beef outlets such as McDonalds also suffered.

The US Department of Agriculture is fighting back.

On Monday it ordered the destruction of 450 calves in a herd containing one of the offspring of the infected cow.

Consumers still think that US beef is safe and are still consuming it Sarah Goodwin National Cattlemen's Beef Association

And despite initial protests from cattlemen, it is banning the slaughter for human consumption of cattle too sick to walk to the abattoir - so-called downers, like the infected cow.

"We're doing everything we can to find the lineage of the cattle, traced back and traced forward," says Sarah Goodwin of the National Cattlemen's Beef Association.

"We have all confidence in our government and what they're doing.

"And we believe that consumers still think that US beef is safe and are still consuming it."

In the all-important domestic US market, which takes 90% of US beef, supplies are still short, especially since the United States banned Canadian beef imports in May after mad cow disease, or BSE, was found in a single calf there.

Holes in the brain

Financial analyst Adam Packard feels the outlook is not too gloomy.

"I think long term it's not the same situation that Canada had, because they export 50% of their meat. We only export 8 to 10% of ours.

"As long as consumers in the US eat beef like they are, this shouldn't have a major impact."

The United States has never had a single case of new variant Creuzfeld Jacob's Disease - the brain-rotting illness humans can catch from infected cattle.

But it is related to other diseases that do affect Americans, and scientists in Europe - where BSE ravaged the beef market in the 1990s - say their US counterparts should do more research.

Federal funding was halted last year for a US defence department project to find out more about prions, the misshapen proteins that make holes in brains.