Economic Impacts of Foreign Animal Disease

June 2, 2008 — 

The USDA's Economic Research Service (ERS) has released a report integrating the results of epidemiological and economic models examining the impact of the introduction of a foreign animal disease on the U.S. agricultural sector.

The study assessed results of a hypothetical outbreak of foot-and-mouth disease (FMD) in a small midwest swine operation. The modeling framework includes effects of the FMD episode on all major agricultural products and assesses these effects on aggregate supply, demand, and trade over 16 quarters.

The study finds that the best control strategies are those that shorten the duration of the outbreak. Destruction of all herds within a 1km radius of the initial outbreak resulted in the shortest duration of the outbreak based on 50 iterations of each proposed control strategy. While export embargoes lead to losses for many agricultural sectors, they also increase domestic supplies and lower prices, benefiting domestic consumers. Total losses to livestock-related enterprises over 16 quarters range between $2,773 million and $4,062 million, depending on disease intensity level, duration of the outbreak, and the response scenario. After seven quarters, production of all commodities returns to pre-disease levels in the hypothesized scenario.

This model is more comprehensive than previous work because (1) it has components for modeling both economic effects and disease-spread effects from an outbreak, for which the results can be integrated; (2) it assesses the effects of a disease outbreak on major agricultural sectors--livestock and crops--along vertical market chains, from production to consumption; and (3) it projects the impacts of the disease outbreak over 20 calendar quarters, rather than for just 1 year.

Source: UDSA, Economic Research Service, May 28, 2008