Economic Consequence Modeling on Foreign Animal and Zoonotic Diseases

Transcription

1 Economic Consequence Modeling on Foreign Animal and Zoonotic Diseases Bruce A. McCarl Distinguished Professor and Regents Professor Department of Agricultural Economics, Texas A&M University National Center for Foreign Animal and Zoonotic Diseases Yanhong Jin Assistant Professor Department of Agricultural, Food and Resource Economics Rutgers, The State University of New Jersey Presented at 2008 IOM/NRC Meeting on Achieving Sustainable Global Capacity for Surveillance and Response to Emerging Diseases of Zoonotic Origin, Woods Hole, MA, September 30, 2008 This work was principally funded by the Office of University Research of the Department of Homeland Security

2 Collaborators / Contributors across presentation TAMU Others Plus more David Bessler, Regents Professor Ag Eco Amy Hagerman, Research Associate Ag Eco Qi Gao, PhD Student Ag Eco Rong Hu, Former PhD Student Ag Eco Wei Huang, PhD Student Ag Eco Jianhong Mu, PhD Student Ag Eco Bo Norby, Asst. Professor Vet Schl Linda Highfield, Research Scientist Vet Schl Levan Elbakidze, Idaho former TAMU Ag Eco David Hartley, Georgetown Terry Nipp, NAIS, FAZD Michael Ward, Sydney former TAMU Vet

3 What is FAZD? DHS Funded National Center of Excellence for Foreign Animal and Zoonotic Disease Defense Texas A&M led Consortium with main team partners being University of California- Davis, University of Southern California, University of Texas Medical Branch and an number of others including Georgetown Veterinarians, Biological Scientists, Epidemiologists, Economists, Spatial modelers, Livestock modelers Disease focus Foot and Mouth Avian Influenza Brucellosis Rift Valley Fever (zoonotic) (zoonotic) - phasing out (zoonotic)

4 FAZD Activities Beyond what we will discuss FAZD is involved with things beyond what we will discuss today that are outside of our area of expertise but fall under this panels scope Two activities are notable Have center investigators involved with ARGUS monitoring global communications for early warning of disease outbreaks NBIS - National Bio-Surveillance Integration System Developing Dashboard system that provides menu driven real time access to related geospatial data and analysis (see next slide) For information Neville Clarke, FAZD director , n-clarke@tamu.edu

5 Impacted States Impacted States Onset Histogram Suspect Products Tue 08/05/ :15:34 E. Coli O157:H7 Outbreak 3 Jul 08 IL, KY, MO, SD, WI, TN 21 Infected Salmonella Saintpaul Outbreak 30 Jul 08 - Multiple States Infected NBIS Member Agencies State Count Updated 6 Aug Texas Aug Illinois Aug New Mexico Jul Arizona Jul Georgia Jul New York Jul Maryland Agent: Country: Domain: Date Range: ARG US Logou t

6 Topic of the day In the original it was stated that you were trying to examine evidence pertinent to an economic case about global surveillance for zoonotic diseases Points in mentioned Most cost-benefit work pertains to specific diseases, such as foot-andmouth, not broad in scope. Yes and no Are there analyses addressing specific functions, such as surveillance, or animal health infrastructure? Detection, vaccination, welfare slaughter, Vaccinate to die/live plus vulnerability No extensive analysis relating sanitary infrastructure to tourism, public health, trade, food security, environment, etc. Event studies Study on the impacts of FMD on tourism in the UK. See bibliography Does not lend itself to a straightforward analysis. You bet Ideal to see a study where the economic analysis actually led to a sustained investment in sanitary infrastructure. English case Would you be able to provide such analysis? Trying to contribute

7 Topic of the day Wow! Anyone have a spare couple of million? Lots of this is unanswerable in time we had/have and is in ways a research agenda. We tried to pull bits and pieces together regarding direct and related costs of simulated and observed outbreaks

8 Elaboration on FAZD Economic Consequence work within FAZD We have been examining consequences of diseases and value of interventions to aid in anticipation, prevention, detection, response, recovery Studies of economics of prevention, preparedness, detection, response and recovery strategies Carcass disposal, Animal ID, Vaccination Vulnerability- RVF, FMD, AI Economics of a priori vs ex post actions Costing of events Link with epidemiological models to cost prospective events Market observation Policy design Incentives for compliance Investments

9 Now for today Economic Consequence work within FAZD Economic Epidemic Integrated modeling Address disease spread and consequent economic cost Focusing on market cost of lost animals cost of government management actions benefits (avoided damages) of alt. management Study of costs incurred above those in effort above Addressing the gap between damages and direct animal loss and government cost Will concentrate on the latter today

10 Economic work within FAZD Observed event studies History shows vulnerability UK FMD outbreak 6.25 million dead animals, loss in billions of $ Netherlands FMD outbreak BSE in England 150 dead citizens Fear and beef demand US and Canadian BSE Lost export markets US Avian Influenza events Slaughtered animals in 10,000 s Regionalized export market closures Asian AI events Animals and people South American FMD Changed nature of beef trade

11 Disease specific cost benefit Simulated TX FMD Case Epidemic costs found to be reduced by some actions Early detection $150 million (68%)- Large Feedlot, $40 million (69%)- Backgrounder Feedlot Vaccine availability and early application Increased total costs dues to costs of vaccination and assumed 50% loss in animal value Enhanced surveillance Decreased by $53 million (45%) -Large Feedlot. Decreased by $16 million (31%) - backgrounder feedlots, Similar results in CA dairy case but vaccine beneficial Preparedness and early detection can be valuable

12 Observed Event Studies In the events that we have examined costs, cost of lost animals was dominated by sum of costs not directly related to disease management and control strategy. Direct Government costs Market consequences Loss in industries Direct Animal loss

13 Direct Government Costs Components Disease control and management costs Carcass disposal costs Compensation paid to farmers

14 Government Costs: 2001 UK FMD

15 Welfare slaughter 2001 UK FMD Outbreak: Slaughter NOTES 1. The totals for dangerous contact noncontiguous premises include the threekilometer cull. 2. The totals slaughtered for welfare reasons include 1,768,000 sheep, cattle and pigs under the Livestock Welfare (Disposal) Scheme and 525,000 lambs under the Light Lambs Scheme. 3. The figures exclude around 4,000 other animals, chiefly goats and deer, slaughtered for disease control purposes and around 3,000 other animals for the Livestock Welfare(Disposal) Scheme 4. The figures exclude many slaughtered new born lambs and calves who were not counted in the Department s database because their value, for compensation purposes, was included in the valuation assigned to their mother. Source: NAO, 2002 Slaughter in thousands Infected Premises Animals slaughtered for the welfare purpose accounted for approximately 40%. Dangerous Contacts Contiguous Dangerous Contacts Non contiguous Slaughter on Suspicion Pigs Welfare Cattle Sheep

16 Animal Welfare slaughter - TX HP Losses CDF is a case where we can not get feed to herds in quarantine X is a case where we can get feed into quarantine Losses (in $ millions) What happens if feed can be moved in? At every outbreak probability level reduces costs moves average by about 100 million

17 Carcass Disposal 2001 UK FMD outbreak At the height of the outbreak the daily weight of carcasses moved was over half the weight of the ammunition the armed services supplies during the entire Gulf War Number of animals slaughtered of and awaiting slaughter Number of animals disposal of and awaiting disposal of 1,200,000 1,000, , , , ,000 1,000, , , , , Number of animals slaughter number of animal awaiting slaughter number of animals disposed number of animals awaiting disposal 540 million cost in UK

18 Compensation Paid to Farmers Too high Farmers over-report or even transport animals from areas outside the event and contact zone, or even manufacturing diseased animals. This is said to have happened in UK Too low Farmers may under-report or hiding sick animals somewhere else. Lack of incentives for preventive measures

19 Market Consequences Domestic commodity market response (change in demand, prices, and price margins) Market consequence Full or partial loss of export markets Loss in stock, equity and futures market

20 Demand Loss Outbreaks may decrease consumption. Domestic cost depends on how large the slaughter is relative to loss in demand. During 1996 UK FMD we see decreases in sales of beef products by 40%, beef consumption by 26%, and beef prices by 21% (Leeming and Tuner, 2004). After the 2001 Japanese BSE case beef consumption decreased by 70% (McCluskey et al. 2005). After 2003 Korean AI incidents consumption of poultry product fell by 30% (Park, Jin and Bessler, 2008). Retailers may have a windfall profit as animal disease outbreaks may widen the retail price margin (Sanjuan and Dawson, 2003; Lloyd et al., 2006; Park, Jin and Bessler, 2008).

21 Consumer Demand kg/capita China and AI 2004 and 2006 Events Per capita Consumption Feb.2003 Hongkong Jan.2005 Hongkong May.2005 MainLand Nov.2005 Taiwan Year kg/capita Per capita poultry meat consumption in China from 2000 to 2007

22 Trade and Price Changes Immediately following the 2003 Canada BSE case US beef prices increase when the U.S. imposed an import ban. After the 2003 U.S. BSE case beef prices decreased and export markets were lost. price (cents per pound) farm price wholesale price retail price 1985m1 1990m1 1995m1 2000m1 2005m1 Canadian BSE US BSE

23 Trade Loss Canadian cattle & beef exports to the U.S. U.S. beef export Canadian BSE, 5/20/ cattle imports (million head) U.S. beef import (million lbs) beef cattle beef imports (million lbs) US BSE, 12/23/ m1 1990m1 1995m1 2000m1 2005m1 1985m1 1990m1 1995m1 2000m1 2005m1

24 Trade Loss May be Long-Lasting Canadian BSE case, U.S. imposed import ban 5/20/2003 Allow imports of ground beef and bone-in cut (<30 months) 3/18/2004 8/8/2003 Allow imports of boneless beef (<30 months) 7/2005 Allow imports of live cattle for immediate slaughter to enter the U.S. (<30 months) U.S BSE, 50+ countries restrict imports or imposed import ban on U.S. beef 12/23/2003 8/8/2006: Korea resumed beef imports from the U.S. 7/27/2006: Japan resumed beef imports from the U.S.

25 Endemic disease and costs in international market A country with an endemic disease may suffer price discrimination in the global market. We see this in beef in Argentina, Bolivia etc where FMD is endemic and beef prices are significantly depressed

26 Loss through Stock Markets The 1996 UK BSE discovery significantly decreased stock prices of 24 UK companies (Henson and Mazzocch 2002). We are finding similar effects with respect to AI events in US

27 Induced Economic Loss Loss of local business Loss in directly affected and relevant industries Loss in upstream and/or downstream industries Reduction in visitorship and tourism

28 Movement Restriction/Ban A quarantine zone is likely to be imposed along with restrictive movement or even movement ban, which will affect Local business within quarantine zone Upstream and downstream industries that have business with establishments within the quarantine zone

29 Tourism Loss: UK FMD Example percent st quarter 2nd quarter 3rd quarter 4th quarter Extensive media coverage of the mass slaughter/ disposal through incineration hurts British tourism. percent Change in number of quarterly tourists (%) March April May June July August -160 Change in monthly overseas visitors to UK of 2001 compared to in 2000 (%) Estimated direct tourism loss of 4.5 to 5.4 billion. Estimated indirect loss of 2.7 to 3.2 billion to business directly affected by tourist and leisure activities. Far exceeded animal losses and disposal costs Source: UK Office of National Statistics of the United Kingdom, NAO 2002.

30 Tourism Loss: SARS Crises The SARS crises greatly deterred foreign tourist to HK and China. The impact is less severe in Canada. This can partly be explained by different crisis management. Lesson learned: Crisis management matters when animal disease outbreak occurs. number of foreign tourists (million) to Canada to China to Hong Kong SARS crisis (April-June, 2003) 2000m1 2002m1 2004m1 2006m1 2008m1

31 Actions do help The 2001 FMD Outbreak was probably the most serious disease epidemic in Great Britain in modern times. It was a catastrophe The 2007 outbreak has been a completely different story not just because it was successfully contained, but because there were systems in place. National Farmers Union

32 Lessons Learned from 2007 UK FMD outbreak Actions do help as does cost benefit analysis Vaccination policies allowed teams, equip., and supplies to be in place within 5 days of outbreak discovery. Animal welfare concerns prompted welfare and farmer support packages, but not in the most timely manner. Communication plans were better handled. Decisions were based on risk assessment and cost/benefit analysis, but somewhat hampered by poor data and lack of evidence. Defra recommended a more rigorous cost benefit analysis model for disease control measures to inform future policy making. pg. 17 Recommendation for expansion in data and information management systems, little improved little since

33 Summary There are economic benefits to surveillance Cost benefit analysis has been disease specific and limited scope geographically, we are trying to widen scope but need epi models and data to support Economic consequences in arena other than loss of animals is important. Demand can and does shift, government costs is large, welfare slaughter and business loss large Policies can make a difference Sorry we cant answer all of your questions but they are in part why FAZD came into existence and continues efforts. Our work is far from done