We face a serious challenge in the prevention and control of Foot and Mouth Disease (FMD). FMD could be devastating to our livestock and dairy producers in two ways. First, the disease reduces the productivity of livestock and dairy as well as requiring the destruction of infected and exposed animals to control it. Second, the public confuses FMD with mad cow disease which can be dangerous to humans where FMD is not. This then reduces consumer demand for meat and dairy products. In addition, there are large indirect impacts that are negative.

Today’s tremendous flow of people and goods across borders greatly increases the odds of an outbreak of FMD in the U.S. Given this, and the potentially devastating impact, the best procedure is not only to increase our border defenses against Foot and Mouth Disease, but also to plan and organize in advance to combat it effectively when it arrives. This is not a short term concern. We will need to continue to be vigilant and prepared in the future.

No one can come up with a specific dollar cost for a Foot and Mouth Disease outbreak. One study done some years ago has a range of $2 billion to $24 billion depending upon the extent of the outbreak, the control strategy used, and the success of the strategy. However, this wide range of costs illustrates that there is great benefit in planning ahead to minimize the costs.

Some of the key things that determine the economic consequences are:

• Geography – Where and over what are will the outbreak occur?
• Timing – How quickly will out breaks be detected and dealt with? This will determine the extent of the outbreak. For example, discovery at the packing plant probably means it is already widespread.
• Strategy – what strategy will be used to respond to the outbreak? Eradication through quarantine, limited vaccination, complete vaccination, or letting the disease run its course all have their own consequences.

There is a wide range of different possible costs that might result from an outbreak of FMD. These will depend upon the geography, the time element, and the degree of success of whatever strategy is adopted. Some of these are:

• Loss of meat export markets. The proportion of our meat production that we export is not as great as that of Denmark or Australia, but it has grown in recent years and is important to our producers. We export 7% of our pork products and 10% of our beef products. Prohibitions would be placed on the sale and international shipment of animals and animal products. Australia, New Zealand, and Canada might capture some of our markets, especially the lucrative Japanese market. This depends upon how the international rules governing disease outbreaks are applied. For example, will quarantines be allowed on a regional basis or enforced nationally? This is a critical issue in terms of our ability to export. Meat from animals with FMD can be sold as cooked meat, and we might shift this to trade in lower value markets, like Russia.
• Reduced domestic meat (and dairy) demand. The amount of any domestic cutback in consumption is a critical unknown. There is little danger to human health from FMD. However, the key is how consumers will react to the consumption of infected species and how long any reluctance to consume such meat and dairy products persists. Will we face a general loss of confidence in the safety and quality of meat and dairy products? Loss of confidence in animal products due to Mad Cow Disease (BSE) has been substantial in Europe. American consumers confuse Mad Cow with Foot and Mouth even though BSE has never been found in the Americas.
• Reduced domestic meat (and dairy) output. Initially, healthy quarantined animals might be slaughtered. The number of quarantined animals that had to be destroyed would likely be small compared with market liquidation occurring from lost exports and reduced domestic consumption. This might initially increase domestic supplies and drive prices downward. Later there might be a decline in production if the outbreak were extensive as herds declined and additional animals are destroyed. For dairy products there would be a decline in output from the start.
• Reduction in demand for animal feed (like corn and soybean meal). The decline in animal numbers would result in fewer animals to feed, and feed grain prices would drop. In March, the fact that hogs from North Carolina were being tested for FMD drove down the prices of both corn and soybeans on the day of the announcement. However, it is the long-term price impact that is most critical.
• Eradication costs. These could be very high. Recently, the Federal Emergency Management Agency conducted a tabletop exercise of a worst-case outbreak in Iowa and found it would have required 50,000 people to contain it. Our unexposed animal population has no antibodies. Animals exposed to the disease are usually destroyed to prevent the spread of the disease. Vaccines may produce only temporary protection so revaccination would be needed at intervals. Vaccinated animals must be slaughtered before international trade can be resumed because they are positive carriers of the disease. Should the disease become widespread or affect large herds, the loss would not only be in this generation of animals but also in the breeding stock for future animals. Individual producers would have to rebuild herds, obtaining disease free animals from somewhere. Because our industry tends to be more concentrated than those in most other countries, this would represent large individual recapitalizations.
• Indirect costs. In Britain, the most important indirect cost, larger than the direct cost, is the loss of tourist revenue in the affected areas. There are a wide variety of other potential indirect costs. There are costs to the transportation industry to maintain the quarantine and to disinfect goods and transportation equipment. There are costs to the food processing and marketing industry from consumer concerns and in handling and segregating FMD products. The magnitude of these will depend on the character and extent of the FMD outbreak.
• Other factors. Public Opinion is very important. From the economic standpoint this affects such things as demand for meat and dairy products under FMD conditions. Public willingness to live with and cooperate with quarantine rules is critical. We will have to face the public reaction to massive destruction of domestic animals. Broad public support and compliance are essential for the success of whatever FMD control strategy is used.

There are many different drivers of costs for different FMD scenarios. The complex interaction among the nature of the outbreak, control strategies, consumer responses, market reactions, trade reactions, and the fact that one group’s costs may actually yield benefits to another group makes the range of potential costs so great.

As an example, take the case of a large concentrated hog operation that is infected and quarantined. The herd would be destroyed, and, even with compensation, the owner would have to invest in rebuilding the herd and getting it certified FMD free. This outbreak might induce consumer concern about the safety of the nation’s pork supply and drive down demand and prices for pork nationally. This would hurt all pork producers (maybe extending into beef as well). It would benefit those consumers who continued to eat pork at lower prices. (This particular indirect impact would be a positive economic impact of this event.)

For trade in pork products, if international rules allowed just the infected region to be quarantined, producers in other regions could continue to export, but producers in the quarantined region would be shut out of trade. Within the region, if the outbreak were well isolated, other producers would not necessarily have their herds destroyed, but this would depend upon the quarantine boundaries. Producers within the infected quarantine area would suffer equally with the first infected producer. Their labor force would be unemployed. Packing plants depend on constant flows of animals, and significant loss of live animal supply would be costly. Packing plants taking animals from the region would also assume a testing burden and there would be extra transportation costs.

What will be most important is the choice of the best strategy to deal with the outbreak. The critical link in the chain of any strategy is the initial rapid identification of the disease. There are other diseases that look similar, so producers must be willing to notify a veterinarian at once and not wait when faced with a suspicious case. Today, the disease can only be confirmed at Plum Island, New York and Animal Disease Centers at Ames, Iowa. We should allow other qualified animal disease diagnostic labs to perform the test as well. It will reduce the time lag before positive identification, and producers may be more willing to come forward if dealing with local people they know and trust. Second, we must be able to quickly mobilize the resources capable of doing the job expertly. Finally, we need to make it clear, and official, to producers that adequate compensation will be paid that recognizes the full value of their animals, be they breeding stock, dairy cows, or meat producing animals. Only if producers have confidence in the effectiveness and equity of an eradication effort will they participate wholeheartedly.