Economy Wide Impacts of a Foreign Animal Disease in the United States

Dermot J. Hayes, Jacinto F. Fabiosa, Amani Elobeid, Miguel Carriquiry
November 2011  [11-WP 525]

This report uses the CARD FAPRI model to evaluate the economy wide impacts of a disease outbreak that eliminates US pork and beef exports simultaneously and pork exports alone. In either case industry losses are enormous and spread well beyond the pork and beef sectors. Revenues fall significantly for poultry, corn and soybean producers and employment in rural areas is negatively impacted as the US pork and beef sectors are forced to downsize. Revenue losses in the combined US pork and beef industries fall by an average of $12.9 billion per year. The removal of this level of value added activity is equivalent to the loss of as many as 58,000 full time jobs. The report uses option prices to calculate the likelihood of a price impact of the magnitude reported here. This suggests a less than one percent possibility of an outbreak of this severity. Multiplying the probability of an outbreak times the reduction in pork industry net revenues over variable costs in the event of an outbreak, suggests that the annual benefit of eliminating the possibility of this outcome would be worth $137 million.

Keywords: Foot and Mouth Disease, Swine Fever, Economic Impact of Exports.

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