Market Impact of Foot-and-Mouth Disease Control Strategies: A UK Case Study

Foot and Mouth Disease (FMD) poses a serious threat to the agricultural sector due to its highly contagious nature. Outbreaks of FMD can lead to substantial disruptions to livestock markets due to loss of production and access to international markets. In a previously FMD-free country, the use of vaccination to augment control of an FMD outbreak is increasingly being recognised as an alternative control strategy to direct slaughtering (Stamping-Out). The choice of control strategy has implications on production, trade and hence prices of the sector. Specific choice of eradication strategies depends on their costs and benefits. Economic impact assessments are often based on Benefit-Cost framework, which provide detailed information on the changes in profit for a farm or budget implications for a government (Rich et al., 2005). However, this framework cannot capture price effects caused by changes in: production due to culling of animals; access to international markets; and consumers’ reaction. These three impacts combine to affect equilibrium within commodity markets (Paarlberg et al., 2002). This paper provides assessment of sectoral level impacts of the eradication choices of FMD outbreaks, which are typically not available from Benefit-Cost framework, in the context of the UK. The FAPRI-UK model, a partial equilibrium model of the agricultural sector, is utilised to investigate market outcomes of different control strategies (namely, stamping-out, and vaccinate-to-die) in the case of FMD outbreaks. The outputs from the simulations of the EXODIS epidemiological model (number of animals culled/vaccinated and duration of outbreak) are used as inputs within the economic model to capture the overall price impact of the animal destruction, export ban and consumers’ response.