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Prevention and control of animal diseases worldwide
Part I: Economic analysis: prevention versus outbreak costs
4.3.3. Indirect impact
Generally, the available research points out that indirect costs are typically significant multiples of direct
plus consequential on-farm costs and losses, although it should be noted that at the same time the literature
also uniformly stresses the difficulties of measuring the precise extent of these costs (A228, A159, A258,
A292).
Such costs are rarely explored in depth in the available literature, largely due to the methodological
difficulties and constraints of this type of analysis and its extensive data requirements. Assessing the
overall impact of an animal disease on both global meat markets and other sectors along the supply chain
necessitates the use of a framework which links markets, both spatially and cross-commodity. Moreover,
the resulting impact assessment is dependent on the various assumptions underpinning the analysis and
constrained by data limitations. Broadly, a distinction can be made in the available literature between expost
assessments of the actual impact of a disease outbreak that has occurred and ex-ante simulations of
the potential impact of a disease outbreak in the event this occurs. The latter are particularly difficult to
perform, and results are inevitably shaped by the underlying assumptions and scenarios. Great caution
should therefore be paid in the interpretation of the results.
From the experience of developed countries (where literature on the indirect costs of a disease is generally
more advanced), the direct costs – although significant – are usually relatively lower than the considerable
indirect costs caused by the loss of consumer confidence and the impact on export trade. The
overwhelming evidence of the available research suggests that where the response to a disease outbreak
has been rapid and strict control measures have been applied, coupled with an effective communication
campaign towards the wider public, the indirect impacts tend to be more contained.
It is important to note that economic analysis to date has focused on the impacts of ad hoc outbreaks rather
than the long term effects of endemic diseases, in other words of smaller but repeated outbreaks over a
number of years. It has also mostly focused on the domestic impact (within a country or economic zone
e.g. the EU) of an outbreak rather than the global market impact.
However, the international community is increasingly concerned about the global social and economic
impacts of endemic diseases as such. This is partly due to changing times. While many animal diseases,
particularly FMD and most types of AI, have long shown signs of becoming endemic in many parts of the
developing world, only since 2001 has the severity of outbreaks of FMD (in Europe and Latin America)
and more recently AI outbreaks in Asia (and moving westward into Europe and Africa) demonstrated that
such events can have a significant impact on international meat markets.
The relative importance of these impacts can be highlighted in the context of the global growth in meat
production and trade of the last 15 years. World meat production has grown from 100 million tonnes in
1990 to nearly 280 million tonnes in 2006. Nearly three quarters of this growth is concentrated in
developing countries, and is accounted for by the pigmeat and poultry sectors. Global meat trade has
grown in similar rates from 8 million tonnes in 1990 to nearly 20 million tonnes by 2006. The value of
meat trade has also increased, but at a lower rate than the volume, indicating the declining trend of meat
prices and the changing meat product composition of trade (much of the growth has been driven by
growing demand for poultry cuts, due to health and economic factors notably the lower prices of poultry
meat relative to other meats). The most significant contributor to the growth in trade has been the poultry
industry (followed by pigmeat), so that the poultry sector’s share of world meat trade has risen from 22%
in 1990 to over 40% in 2005. Consequently, a severe transboundary disease outbreak such as HPAI can
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