of a Foot and Mouth Disease outbreak on Australia
Plunkett and Stuart Wilson
Plunkett is an Assistant Commissioner within the Productivity Commission.
Wilson is a Research Manager within the Productivity Commission.
And Eradication Costs
Impact Of Trade Restrictions
Of Livestock Industry Revenue
In 2001, an outbreak of
Foot and Mouth Disease (FMD) in the United Kingdom (UK) had a dramatic
effect on rural areas in that country. This article looks at the possible
effects that an outbreak of FMD would have on Australia. It draws on the
Productivity Commission’s recently completed study of the Impact
of a Foot and Mouth Disease outbreak on Australia. The study is an input
to the review that all governments and the livestock industries are
currently undertaking into the prevention, preparedness for and management
of major animal disease outbreaks such as FMD.
The study considered the economic, social and
environmental impacts of three hypothetical FMD outbreak scenarios which
were developed by the Commonwealth Department of Agriculture, Fisheries and
Forestry — Australia (AFFA) in consultation with State Governments. The
outbreak scenarios were:
small single point outbreak in the wheat-sheep zone of south west
Western Australia, primarily affecting sheep. It lasts for around 3
months and results in the slaughter of 38 000 livestock to stamp out the
medium outbreak lasting 6 months, which has been depicted as starting in
north Queensland and spreading to central Queensland and the Northern
Territory. The outbreak results in the slaughter of around 50 000
multi-state outbreak taking 12 months to control, which has been assumed
to begin in southern New South Wales and to spread to Western Victoria
and South East of South Australia. The outbreak involves the slaughter
of around 750 000 animals.
Broadly, the impacts of an FMD outbreak arise
from two sources:
costs of control and eradication of the disease itself; and
loss of revenue from the closure of export markets to Australian
While there would be some similarities in the
economic and social impacts of an outbreak in Australia compared to the UK,
there would also be some key differences. In particular, the far greater
importance to Australia of livestock exports — almost $10 billion in
2000‑01, or 6 per cent of total exports — means that the trade
effects of an outbreak would be far greater in Australia than was the case
in the UK.
Control And Eradication Costs
A nationally agreed strategy to control an
FMD outbreak is set out in the Australian Veterinary Emergency Plan. This
strategy — known as ‘stamping out’ — includes:
a quarantine area around all known infections;
all infected herds and other herds that have been in ‘dangerous
contact’ with them;
stock owners for the livestock slaughtered as part of the stamping out
Significant government and industry resources
would be required to ‘stamp out’ FMD. The Commission estimates that
control and compensation costs could range from around $30 million for the 3
month outbreak scenario, to up to $450 million for the 12 month scenario.
Compensation for livestock slaughtered to control the disease could cost
between $4 million for a small outbreak scenario up to around $40 million
for a large outbreak.
Measures to control the disease could have an
impact on other industries. For example, in the UK, control measures had a
large effect on the tourism industry, although the relationship between the
livestock and tourism industries is not as strong in Australia.
Control and eradication measures would have a
significant social impact. Within control zones, there would be significant
added pressures on individuals, communities and emergency workers from: loss
of income; the trauma associated with the compulsory slaughter and disposal
of livestock; the disruption and inconvenience associated with movement
restrictions; the long hours of work (such as by emergency workers), often
in stressful circumstances and the need to provide emotional support.
Drawing on the experience of previous animal
disease outbreaks in Australia, the Productivity Commission noted that
stresses arising from an outbreak, and the subsequent control and
eradication procedures, could lead to a range of personal and family
problems. In addition there could be disruption to the cohesiveness of
affected communities. In many instances, the elimination of the disease
would reduce the sources of stress and people’s wellbeing would quickly
recover. But some of the impacts identified above would result in
longer-term problems. For instance, previous experience suggests that
community divisions and antagonism can persist long after the event.
The potential environmental impacts of an FMD
outbreak would be largely associated with the disposal of animal carcasses.
Burial can lead to contamination of ground water by leachates from the
disposal pit, while burning can also potentially contaminate soil. Despite
the need for some remediation work on early disposal sites, monitoring of
sites in the UK to date has found that no water sources used for public
supply have been affected by FMD disposals. The key to minimising potential
environmental problems is good preparation. Given the considerable work on
carcass disposal that is underway in Australia, the Commission concluded
that significant environmental problems could be avoided. However, this
would involve ongoing monitoring and remediation costs as necessary.
The Impact Of Trade Restrictions
For a country such as Australia with major
exports of livestock products, the loss of revenue from the trade
restrictions which would result from an FMD outbreak would be far greater
than costs arising from the control of the disease. This is in contrast to
the UK which only has a small livestock product trade. Trade costs would be
large because countries that are free from FMD will not import meat (or a
range of other agricultural products) from FMD-infected countries for fear
of importing the disease. This effectively divides the world market for meat
in two — an FMD-free market (in which meat attracts a price premium) and
an FMD-endemic market. Currently, Australia exports over 85 per cent of its
beef and around 40 per cent of its sheep meat to FMD-free countries.
If there were an FMD outbreak in Australia,
all markets for livestock commodities would immediately close. Countries
that do not have FMD, and even some that do, would not reopen their markets
to Australian meat products until at least three months after the disease
was eradicated in Australia. Some exports to FMD-endemic countries could
resume if they were satisfied that the risk of introducing a new strain of
FMD was low. Because wool and dairy products can potentially also carry the
virus, it is likely that there would be an initial disruption to exports of
these commodities until assurances could be given that they had been treated
to inactivate the virus.
The closure of export markets would have a
severe effect on the livestock industry throughout the nation, irrespective
of the location of the FMD outbreak within Australia. Export prices and
returns to exporters would fall dramatically. A glut of meat would cause the
domestic price of all meats to fall. This would further lower returns to
producers and processors although, at the whole of economy level, it is
largely a transfer to consumers. In turn, low prices would affect both farm
production and domestic consumption of meat. Notwithstanding the reduction
in prices, it is unlikely that all livestock production could be sold,
raising the spectre of some on-farm culling of animals beyond that required
to eradicate the disease.
Loss Of Livestock
The Commission estimated that the cumulative
loss in export and domestic market revenue to the livestock and meat
processing industries would be around $5 700 million for the single point
outbreak scenario, rising to around $12 800 million for an outbreak lasting
12 months. In each scenario, the period of revenue loss would extend well
beyond the time taken to eradicate the disease owing to the need to rebuild
international markets (see figure 1 and table 1).
Estimated revenue losses to the livestock industries for each outbreak
scenario Annual loss in
export and domestic market revenue
- Direct losses from the FMD outbreak
industry revenue loss
and control costs
Net present value of losses at the wholesale level over the outbreak.
Source: PC estimates.
With exports of around $4 billion annually,
the beef industry would be the hardest hit in each outbreak scenario,
although there would also be significant costs to the sheepmeat and pigmeat
As Australia’s major beef producer and
exporter, Queensland would be more affected than other States in absolute
terms. While the losses in other States would be smaller, the effects would,
nevertheless, be significant. For example, a number of the regions likely to
suffer the largest relative losses in output would be in South Australia.
The effects within States would not be uniform, but would generally be
concentrated in inland rural areas where livestock intensity is greatest and
where a high proportion of people are employed in livestock production and
The revenue losses to the livestock and meat
processing industries would have wider impacts on the national economy. The
Commission estimates that the 12 month outbreak scenario would reduce
Australia’s Gross Domestic Product (GDP) by around $2 000 million in the
first year and by between $8 000 million and $13 000 million over 10 years.
The effects of a 6 month outbreak on GDP would be around half that of the 12
month scenario (table 2).
2 - Impact of the outbreak
scenarios on Gross Domestic Product
in the first year
000 – 3 000
000 – 5 000
000 – 13 000
Net present value of losses at the wholesale level over the outbreak.
Reflecting the direct impacts, activity and
employment levels in the livestock industries would be substantially
reduced. For instance, employment in beef production and meat processing
could fall by up to 30 per cent. The indirect impacts would also be
significant. Employment in industries supplying inputs to livestock
production would also fall, such as the workforce in road transport and in
the agricultural equipment industry.
However, the Commission’s modelling also
shows that activity in some industries would increase, partially offsetting
the livestock industry losses. For example, the loss of export markets for
livestock commodities would add to pressure for a depreciation of the
exchange rate. This could result in higher exports from other sectors of the
economy, such as the mining industry and some manufacturing industries. It
could also result in any initial adverse effect on tourism being offset over
the recovery period.
Previous outbreaks and natural disasters have
identified financial stress or hardship as one of the main causes of adverse
social impacts. In the case of FMD, significant social effects would not be
confined to the control zones — an outbreak would cause financial stress
throughout rural communities in Australia. Many more people would be
adversely affected through trade losses than through the disease control
The Commission’s study found that the
economic and social effects of an outbreak could be significantly reduced if
FMD-free trade zones could be established in Australia, which would allow
unaffected areas to continue trading. It
also found that emergency ring vaccination of livestock is likely to be an
appropriate policy option whenever it could materially reduce the length of
The full report is available on the
Productivity Commission website at www.pc.gov.au
I am grateful for helpful
comments on drafts, provided by Paul Donnelly, John Freebairn, Rick
Lacey, John O’Connor, Phil Pardey, Roley Piggott, and Alistair Watson,
as well as some workshop participants.