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Prevention and control of animal diseases worldwide
Part I: Economic analysis: prevention versus outbreak costs
have potentially destabilising effects on international poultry markets and can disrupt the sector’s growth
prospects (at least in the short to medium term) in the developing world.
4.3.3.1. Ripple effects
In terms of the costs that are more systematically covered by literature (price effects, trade impact and
impact on upstream/downstream activities), from a review of the available research the following
conclusions can be drawn:
a) Price / demand shocks
On the basis of economic theory, the effect on prices will depend on the balance of supply and demand
shifts caused by the outbreak, and whether the affected country is a closed (limited net trade) or an open
(trade oriented) economy. In a closed economy, the anticipated impact would be price falls in the affected
areas and for the affected products if there is a consumption shock, but higher prices if supply falls and
there is no change in demand. In open economies (importing or exporting), prices will be more affected by
instability in world markets (and may also contribute to it). In the latter case, prices even in disease-free
countries will be affected (e.g. an importing or exporting country facing higher prices in the world market,
or where consumer demand is affected by the international crisis). With increasing trade and globalisation,
the effects on disease-free countries have become more pronounced. Some examples of such effects can
be found in Table 8.
At a global level, the net effect on prices of an animal disease outbreak is less clear. Certainly, meat
markets affected by animal disease outbreaks are characterised by considerable instability as governments
are forced to adopt policies to protect their livestock sectors, including import bans, tighter sanitary border
control measures, and stronger domestic regulations including movement controls and quarantine, which
result in increased price volatility both in domestic markets and worldwide. Some countries will loose, but
other countries will gain due to the higher prices offered to products from disease-free markets (not
necessarily countries, but even regions/compartments if such policies are applied). But the compounded
net effect could be in either direction.
The global impact depends mainly on 3 factors: a) the supply and demand balance worldwide for the
affected products (this is strongly dependent on the extent of consumer health concerns, which tends to
vary between countries and cultures as is evident from the examples quoted in Table 8) , b) the level of
concentration in global meat markets and the position held by the disease-affected as well as the diseasefree
countries within this (i.e. whether they are a major exporter/importer), and c) the world supply and
demand in substitute products.
For example, in 2004, the HPAI outbreaks led to a more than 30% increase in international poultry prices,
which is attributed not just to HPAI-induced pressures in the world poultry market but also to the
simultaneous BSE-related pressures on the international beef market (A111d). By contrast, since late
2005, AI outbreaks in approximately 40 previously unaffected countries (many of which are the major
poultry consuming and importing countries of Europe, the Middle East, and Africa) may have prompted
the sharp decline in the FAO poultry price index during the same period. In 2001, as a consequence of the
severe FMD pandemic that prompted countries around the globe to close their borders to imports,
international prices for beef and pigmeat fell, while poultry prices rose.
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