Domestic and Trade Impacts of Foot and Mouth Disease and BSE on the Australian Beef Industry

Although Australia is the sixth largest producer of beef, with production of 2 million metric tonnes, behind regions such as the USA, Brazil and the EU it is the second largest exporter of beef behind Brazil. Average beef exports from Australia are approximately 65% of the total amount of beef produced or about 1.3 million metric tonnes. For these reasons Australia is particularly vulnerable to diseases that are not endemic to the country and could close or disrupt its export markets for beef. In this study we construct a bioeconomic optimization model of the Australian beef industry that captures production and consumption decisions, domestically and internationally, and the impacts on the beef industry of two potentially catastrophic diseases, foot and mouth disease (FMD) and bovine spongiform encephalitis (BSE). The results of the study suggest that depending on control methods losses to the economy of FMD range from $1.3 $20 billion, with the impact on producers and consumers varying depending on control levels. For BSE the effect of trade bans due to the disease is a range with a gain of $200 million to a loss of $400 million in total economic welfare, with the negative impacts on producer surplus in all cases and consumer welfare being positive in all cases. 1 Paper presented to the 54 annual meeting of the Australian Agricultural and Resource Economics Society, 10-12 February 2010, Adelaide, SA. Australia. 2 PRT Consulting. Armidale, NSW. Australia. 2350, and the University of New England, Armidale, NSW. 2350. 3 Professor, School of Economic Sciences, Washington State University, Pullman, WA. U.S.A. 991646210. 4 Former graduate student, School of Economic Sciences, Washington State University, Pullman, WA. U.S.A. 99164-6210. * Research supported by the Department of Agriculture and Food Western Australia and the United States Department of Agriculture PREISM program.