Why Australia can’t afford to risk an FMD outbreak

Beef Central, 11/10/2013

The precious nature of Australia’s Foot and Mouth Disease-free status has been further reinforced by an analysis of the potential cost of a future outbreak.

The Australian Bureau of Agriculture and Resources Economics and Sciences has analysed the economic and social impacts of a hypothetical FMD outbreak under three scenarios and a cost-benefit analysis of three different eradication strategies.

International experience has shown that an outbreak of the highly contagious disease would result in trade bans on livestock products to export destinations and the diversion of product back onto domestic markets.

Such an outcome would be devastating for Australia’s cattle and beef industry which relies on export customers to buy more than 60pc of its annual production.  

The report notes that adverse impacts would be felt by producers and other industries well beyond the outbreak area, causing heavy financial losses and widespread social impacts.

ABARES estimates that a large, multi-state outbreak would cost in the vicinity of $49.3 billion to $51.8 billion in present value terms over 10 years.

That compares to a previous study by the Productivity Commission in 2002 which estimated income losses at $12.8 billion to $14.8 billion over 10 years.

That study assumed Australia would recover all of its export markets within three months after the eradication of the disease.

In its latest analysis which is based on more recent global experiences with FMD, ABARES assumes Australia would face a longer time out of the international market and a greater loss of market share.

As part of the study ABARES modelled disease control strategies for three scenarios:

  • A small outbreak in North Queensland, where most cattle are raised on extensive rangelands;
  • A small outbreak in Victoria’s Goulburn Valley, which has a high density of livestock and intensive dairy farms;
  • A large multi-state outbreak that, by the time of detection, has spread from Victoria to all eastern states (New South Wales, Queensland, South Australia, Victoria, and Tasmania).

Disease control strategies examined included:

  • For the small and large outbreaks:

    • stamping out,  which involves destruction and disposal of animals in infected and dangerous contact premises
    • stamping out with extensive vaccination, which requires vaccination of all FMD?susceptible animals within a designated ring surrounding infected and dangerous contact premises;  and removal of vaccinated animals once the disease is contained
  • For the large multi-state outbreak (in addition to the above):

    • stamping out with targeted vaccination, which includes the vaccination of all cattle and sheep on mixed cattle and sheep farms within a designated ring surrounding infected and dangerous contact premises
    • In outbreak areas outside the high-risk ring, stamping out  (without vaccination) is undertaken.

For the simulated examples of two small FMD outbreaks in Queensland and Victoria, assuming that export markets lift  bans on Australian product quickly,  the modeling predicts revenue losses of between $5.6 billion and $6.2 billion (in present value terms) over 10 years, depending on the response strategy used.

In the event of a large multi-state FMD outbreak ABARES estimates revenue losses of between $49.3 billion and $51.8 billion (in present value terms) over 10 years.

These revenue losses account for around 99 per cent of direct economic costs, with the remaining 1 per cent being the cost of disease control.

The cost of control increases with the size of an outbreak because more animals must be managed. Control costs are estimated at between $60 million and $373 million, with $6.3 million to $60.2 million required in compensation for animals destroyed during control procedures.

The ABARES estimates of total revenue losses include export market loss and loss from reduced domestic prices.

The report notes that selected input providers to FMD-susceptible livestock production (for example, transport, trade and feedstock suppliers) could see reductions in the present value of production of $11.5 billion over 10 years.

“The findings suggest that these economic and social impacts can be reduced by the choice of eradication strategy – with results indicating that vaccination could play a beneficial role where spread is rapid in high density production areas,” the report states.

“Impacts can also be reduced by resuming market access quickly where feasible, improving response preparedness (though surveillance, eradication arrangements and livestock tracing) and the use of communication and support before and during an outbreak.”

Stamping out is shown to be the most cost-effective strategy for smaller outbreaks in extensive livestock production systems, such as the hypothetical outbreak in North Queensland’s cattle producing rangelands.

In extensive production areas, rates of disease spread are expected to be low, requiring fewer resources for culling and disposal.

For smaller, slower-spreading outbreaks, resources are likely to be adequate to find and remove infected herds using stamping out.

Of the two vaccination strategies examined for the large multi-state outbreak, targeted vaccination was shown to reduce the time for eradication.

Extensive vaccination requires a large diversion of resources from stamping out to vaccination, increasing the chances of the disease escaping containment.

With targeted vaccination, the significantly fewer animals vaccinated require less time for removal, meaning that trade access is regained more quickly.

Australian's animal health and biosecurity sector has been focusing on improving disease response plans in recent years after two the Beale (2008) and Matthews (2012) reports found existing systems were unresourced and underprepared.

To read the full report click here

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