Economic Impacts of Foreign Animal Disease
by Philip L. Paarlberg, Ann Hillberg Seitzinger, John G. Lee, and Kenneth Mathews
Economic Research Report No. (ERR-57) 80 pp, May 2008
This study uses a modeling framework to estimate the nature of
economic impacts of outbreaks of foreign-source livestock diseases.
The 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.
What Is the Issue?
As more is learned about the impacts of foreign animal disease
outbreaks, questions arise regarding the efficacy of existing
animal disease-impact models for capturing the array of effects
across many economic sectors and over time. Previous models lacked
adequate treatment of either the economic components or the
epidemiological components, and, in some cases, both. Further,
there is a need to address the ways that alternative control
strategies affect the economic interests of the numerous
agricultural sectors, both on and off the farm.
What Are the Major Findings?
While the framework can be applied to many livestock diseases,
this study demonstrates the model with a hypothetical outbreak of
foot-and-mouth disease (FMD). The outbreak is assumed to occur in
small hog operations in the U.S. Midwest, a result of using
contaminated garbage as feed. Various disease-control strategies
are entered into the model. The economic effects from each control
strategy are based on 50 iterations of the disease-outbreak
epidemiological model, which randomly assigns different herd sizes,
spatial distribution, and other variables for each iteration. The
model produced the following
• Epidemiological model results show that relatively few animals
need to be destroyed because of the disease.
• Economic model results show large monetary losses for beef, beef
cattle, hogs, and pork sectors, mainly caused by the loss of
exports under a given set of foreign sanitary and phytosanitary
policies. Other agricultural sectors experience small losses or, in
some cases, small gains.
• Swine and pork sectors recover shortly after export restrictions
end, while effects on beef and cattle sectors last longer due to
the longer cattle production cycle.
• Disease control strategies that reduce the duration of the
outbreak are the most effective choices for reducing the economic
toll. The model found that three strategies reduce the duration to
less than one quarter. In order of least to most effective, based
on the mean number of days to end the outbreak, for the
hypothetical outbreak these are:
- Destruction of only those herds within a radius of 1 kilometer
(km) that have had direct contact with infected herds: Outbreaks
average 56.48 days.
- Direct-and-indirect-contact slaughter, which destroys
direct-contact herds plus those herds indirectly exposed to an
infected herd through movement of people, vehicles, or other
possible sources of infection: Outbreaks average 54.99 days.
- Destruction of all herds within a 1 km radius of the initial
outbreak: Outbreaks average 36.80 days.
• Export embargoes increase domestic meat supplies, and domestic
consumers benefit from lower prices during the quarters in which
exports are embargoed.
• Model results, extended to 16 quarters, show that for this
- After 7 quarters, production of all commodities increases to the
point where both domestic consumption and trade return to
- Total trade losses, plus other disease-related costs to capital
and management, amount to between $2,773 million and $4,062
million, compared with a disease-free baseline period
How Was the Study Conducted?
The framework has two components: (1) The North American Animal
Disease-spread Model (NAADSM), developed by the U.S. Department of
Agriculture's Animal and Plant Health Inspection Service, which
enables estimates of epidemiological damages (supply shocks) from
varying disease-spread and control scenarios. These estimates can
then be integrated with (2) an economic model, developed by
Paarlberg, Seitzinger, and Lee, that assesses effects of supply
shocks from the epidemiological model, along with demand and trade
shocks, projected over the simulation period.
To illustrate the modeling framework, a hypothetical outbreak of
FMD arising from feeding garbage in four small farrow-to-finish
operations is examined under three alternative control strategies
and three levels of disease intensity. The control strategies are
(1) destruction of direct-contact herds, (2) destruction of direct
contact and indirect-contact herds, and (3) destruction of all
animals within a 1-km ring. Disease intensity is examined at low,
medium, and high levels. Each disease control scenario was
simulated 50 times, with the epidemiological model determining
effects of an outbreak.
Animal losses and duration of the FMD outbreak are sensitive to
the conditions assumed for the outbreak, i.e., that it started on
small pig farms and was confined to them. Alternative scenarios
could result in higher costs than reported in this analysis. Future
work will evaluate the robustness of these results.