Potential Impact of an FMD Release in the United States
Posted by nonbafks on August 12, 2008
The possibility of the introduction of FMD into the United States is of concern because this country has the largest feed-cattle industry in the world, and it is the world’s largest producer of beef, primarily high-quality, grain-fed beef for export and domestic use.
Although estimates of the losses vary, experts agree that the economic consequences of a FMD outbreak on the U.S. mainland could mean significant losses, especially for red meat producers, whose animals would be at risk for disease, depending on how and where an outbreak occurred. Current estimates of U.S. livestock inventories are 97 million cattle and calves, 7 million sheep, and 59 million hogs and pigs, all susceptible to an FMD outbreak. The total value of the cash receipts for U.S. livestock in 2007 was $141.4 billion. The total export value of red meat in 2007 was $6.4 billion. These values represent the upper bounds of estimated losses.
Direct costs to the government would include the costs of disease control and eradication, such as the maintenance of animal movement controls, control areas, and intensified border inspections; the destruction and disposal of infected animals; vaccines; and compensation to producers for the costs of disease containment. However, government compensation programs might not cover 100 percent of producers’ costs. As a result, direct costs would also occur for disinfection and for the value of any slaughtered animals not subject to government compensation.
According to the available studies, the direct costs of controlling and eradicating a U.S. outbreak of FMD could vary significantly, depending on many factors including the extent of the outbreak and the control strategy employed.
Indirect costs of an FMD outbreak would include costs affecting consumers, ancillary agricultural industries, and other sectors of the economy. For example, if large numbers of animals were destroyed as part of a control and eradication effort, then ancillary industries such as meat processing facilities and feed suppliers would be likely to lose revenue.
Furthermore, an FMD outbreak could have adverse effects such as unemployment, loss of income (to the extent that government compensation would not fully reimburse producers), and decreased economic activity, which could ripple through other sectors of the economy as well. However, our analyses show that these effects would likely be local or regional and limited in scope.
Ranchers in Riley and adjacent counties
own approximately 450,000 cattle.
The economic effects of a FMD outbreak would depend on the characteristics of the outbreak and how producers, consumers, and the government responded to it. The scale of the outbreak would depend on the time elapsed before detection and the number of animals exposed, among other factors. Costs to producers of addressing the disease outbreak and taking steps to recover would similarly vary. The responses of consumers in the domestic market would depend on their perceptions of safety, as well as changes in the relative prices of substitutes for the affected meat products, as supply adjusted to the FMD disruption. In overseas markets, consumer responses would be mediated by the actions their governments would take or not take to restrict imports from the United States. Because an overall estimate of effects depends heavily on the assumptions made about these variables, it is not possible to settle on a single economic assessment of the cost to the United States of an FMD outbreak. We have reviewed literature that considers but a few of the many possible scenarios in order to illustrate cost components and to consider the possible market reaction rather than to predict any particular outcome.
Keywords: outbreak cost, economic impact, indirect costs
Page 27, GAO-08-821T
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