Progress 10/01/10 to 09/30/15
Outputs
Target Audience:Academic researchers and government researchers and policy makers working on food policy as related to animal disease prevention and control, particularly as regards foot and mouth disease. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided?
Nothing Reported
How have the results been disseminated to communities of interest?
Nothing Reported
What do you plan to do during the next reporting period to accomplish the goals?
Nothing Reported
Impacts
What was accomplished under these goals?
My research efforts focused on identifying general lessons from the application of economic theory and methodologies to improving animal health management. That goal was reached through two papers, one of which was presented to a large OECD international conference that discussed the integration of economics, science and policy in managing animal health and was attended by major academic and government specialists working in this area. Following publication of a selected set of papers in the Proceedings, including my work, my co-author and I wrote a subsequent, considerably expanded paper to extend our views and that paper was published in a noted academic journal as part of a special issue on animal health control. My co-author on these papers is Pablo Valdes-Donoso, a Chilean graduate student that I have mentored since he began his PhD at UC Davis. He is completing his PhD in Veterinary Medicine (epidemiology) and his MS in Agricultural and Resource Economics. We have subsequently published a paper on the use of economics in the management of animal health issues in the Chilean salmon industry and have a subsequent paper accepted in PLOS One on the measurement and control of PRSS, a swine disease. I also mentored Matthew MacLachlan who completed his PhD in Agricultural and Resource Economics with a thesis on animal disease and invasive species and is now an Economist at ERS.
Publications
- Type:
Book Chapters
Status:
Published
Year Published:
2015
Citation:
Jarvis, L.S. and Valdes-Donoso, P. 2013. Economic Analysis of Animal Health Issues: A Guide to Critical Thinking, in Livestock Disease Policies: Building Bridges Between Science and Economics. OECD. Proceedings of Workshop of same title, 3-4 June, 2013.
- Type:
Journal Articles
Status:
Published
Year Published:
2015
Citation:
Jarvis, L.S. and Valdes-Donoso, P. 2015. A Selective Review of the Economic Analysis of Animal Health Management. Journal of Agricultural Economics, August 20.
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Progress 10/01/13 to 09/30/14
Outputs
Target Audience:
Nothing Reported
Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided? I continue to provide mentoring and training to my co-author, Pablo Valdes-Donoso, a PhD graduate student in Veterinary Medicine who is also completing an MS in Agricultural and Resource Economics at UC Davis. We have continued to develop research on the use of economics in the analysis of animal disease and he is now doing research on the control and/or possible eradication of Porcine Reproductive and Respiratory Syndrome (PRRS) in Minnesota. I am chair of his MS thesis and a member of his PhD dissertation committee. How have the results been disseminated to communities of interest? We have a paper with a revise and resubmit at the Journal of Agricultural Economics that I anticipate will be accepted in early January. What do you plan to do during the next reporting period to accomplish the goals? We will revise the paper for the JAE and will continue with research on PRRS.
Impacts
What was accomplished under these goals?
Undertook research to develop, write and revise a paper titled: A Selective Review of the Use of Economics to Achieve Insights for Animal Disease Control. The paper will appear in a Special Supplement of the Journal of Agricultural Economics (UK) that will focus on animal disease control. The paper reviews methodologies used to analyze disease prevention, control and eradication by economists and veterinarians, focusing primarily on the use of benefit-cost analysis to conceptualize problems and identify policy alternatives. I also worked with Valdes-Donoso and Andres Perez, Professor at U. Minnesota, to conceptualize and model the swine production system in Minnesota, in order to analyse the effect of alternative approaches to reducing the economic cost of PRRS.
Publications
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Progress 01/01/13 to 09/30/13
Outputs
Target Audience: I presented a paper "Economic Analysis of Animal health Issues: A Guide to Critical Thinking at the OECE Workshop Analyzing Animal Disease Control in Paris in June 2013. Approximately 75 specialists in animal health issues from OECD and observer nations attended. The OECD subsequently published the conference proceedings in a book and also made the book available on-line. The book, including my article (co-authored with Pablo Valdes-Donoso), should reach a large number of government, academic and practicing economists, veterinarians and other professionals concerned with animal disease control internationally. Changes/Problems:
Nothing Reported
What opportunities for training and professional development has the project provided? I provided mentoring and training to my co-author, Pablo Valdes-Donoso, a PhD graduate student in Veterinary Medicine who is also completing an MS in Agricultural and Resource Economics at UC Davis. I invited him to work as a research assistant to compile bibliographic information and subsequently engaged him in discussion re the topic and included him as a co-author. How have the results been disseminated to communities of interest? Yes, published as a book in hard copy and electronically. What do you plan to do during the next reporting period to accomplish the goals? I plan to write an extended version of the paper for publication in the journal Agricultural Economics, which has expressed interest in publishing a supplementary edition of the journal on animal disease control that will contain a number of the papers from the workshop.
Impacts
What was accomplished under these goals?
Undertook research to develop, write and revise a paper for the OECD Workshop on Livestock Disease Policies, OECD, Paris, June 3-4, 2013. Developed a PowerPoint presentation for the Workshop and, in response to comments from workshop participants and referees, revised the paper for publication. The paper reviews methodologies used to analyze disease prevention, control and eradication by economists and veterinarians. Despite the benefits of working together, economists and veterinarians often struggle to feel comfortable in dialogue with each other. As a result, some of the mutual gains that could be achieved through collaboration are lost. We review professional paradigms, the factors that influence the choice of methodology, interpretation, and the application of lessons learned to national policy.
Publications
- Type:
Book Chapters
Status:
Published
Year Published:
2013
Citation:
Jarvis, Lovell S. and Pablo Valdes-Donoso, Economic Analysis of Animal Health Issues: A Guide to Critical Thinking, In Jesus Anton, Ed., Proceedings: Workshop on Livestock disease policies: Building bridges between science and economics , OECD, Paris 3-4 June 2013.
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Progress 01/01/12 to 12/31/12
Outputs
OUTPUTS: Lovell Jarvis had completed paper analyzing the effects of foot and mouth disease in exporting countries and sanitary policy in importing countries on trade flows and beef prices in international markets. That paper was returned with a revise and resubmit at the American Journal of Agricultural Economics. Jarvis and co-authors have been working on revisions prior to resubmission. Lovell Jarvis is a member of a US-European network seeking to improve the use of economics in animal health programs that are located primarily in veterinary programs. Lovell Jarvis is writing a paper for an OECD conference "Livestock disease policies: Building bridges between animal sciences and economics," June 2013. Jarvis's paper is focused on the use of economics to improve the allocation of animal health resources. Dan Sumner conducted research on disputes involving technical barriers to trade in animal products. Sumner presented "Recent and Potential Trade Disputes Over Technical Barriers" at conference titled: Emerging Issues in Global Animal Product Trade: Assessing the Effects of Free Trade Agreements on Global Meat, Poultry and Dairy Trade, Washington DC September 27 - 28, 2012. The slides are available at http://www.aic.ucdavis.edu/publications/TradeBarriers.pdf PARTICIPANTS: Jose Cancino, INACAP, Santiago, Chile and Jose Bervejillo, consultant, Montevideo, Uruguay worked on revising the paper with Jarvis for the AJAE. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
Jarvis' working paper is circulating and has produced discussion of the market effects of Food and Mouth Disease on international trade in beef. Sumner's presentation will contribute to international discussions of efforts to reduce trade barriers and increase trade in animal products.
Publications
- Sumner, Daniel A. 2012. Recent and Potential Trade Disputes Over Technical Barriers. Emerging Issues in Global Animal Product Trade: Assessing the Effects of Free Trade Agreements on Global Meat, Poultry and Dairy Trade. UC Agricultural Issues Center. (PowerPoint presentation) September 27-28, 2012. http://www.aic.ucdavis.edu/publications/TradeBarriers.pdf
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Progress 01/01/11 to 12/31/11
Outputs
OUTPUTS: Revised a paper and submitted it to American Journal of Agricultural Economics. Working on draft of paper for publication in popular press. PARTICIPANTS: LS Jarvis, Jose Cancino and Jose Bervejillo collaborated in revision of paper, Revised paper titled The Effect of Foot and Mouth Disease on Trade and Prices in International Beef Markets. Cancino is Director of Institutional Research and Development, Universidad Tecnologica de Chile, Santiago, and Bervejillo is Economic Consultant, Montevideo, Uruguay. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
Econometric analysis using two step quantitative analysis (probit and OLS) found that the existence of Foot and Mouth Disease (FMD), if present in a limited and controlled scope in a beef exporting country, e.g., Uruguay and Brazil, reduces access to a few high price markets and may result in a lower price of beef in the markets to which it gains access, relative to beef of the same quality from countries that are free of FMD. The total measured price sanction is approximately 20%-30%, or roughly half to two-thirds the amount previously reported. This sanction is composed of two parts: first, a reduction in access to import markets that pay higher prices and, second, a reduction in the price of beef sold in markets to which access is gained, relative to beef of the same quality from countries that are FMD free. We find that Uruguay and Brazil now gain access to higher priced markets so that their average prices are not as seriously reduced by loss of access to higher priced markets that exclude FMD compromised beef. We estimate those losses to be on the order of 10%, though it is difficult to obtain more precise estimates with our model as it does not estimate trade flows. In general, even when access is gained to higher priced markets, imported beef faces tariff quotas that limit the volume that can be sold. We also find that beef from FMD compromised countries is sold at lower prices. We believe this is largely due to a lower quality of beef from these countries, not a price sanction based on the existence of FMD. If this is true, the total sanction from limited and controlled FMD is currently rather small. These findings have policy importance insofar as the benefits from FMD eradication must now depend almost wholly on local productivity increases that result from eradication, as the price benefits are small. Fortunately, improvements in vaccination, improved controls, and improved logistics and transportation have significantly facilitated vaccination campaigns, so we believe eradication is increasingly profitable in many countries even if the price benefit from access to other markets is small.
Publications
- No publications reported this period
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Progress 01/01/10 to 12/31/10
Outputs
OUTPUTS: We used a 2 step quantitative model to analyze Foot & Mouth Disease (FMD) effects on international beef markets over time. Using monthly data from 1990-2002 for 7 major beef exporters and 22 major beef importers, we use a probit equation to estimate probability that country i exports to country j accounting for FMD exporter status, importer sanitary policy, beef quality, trade preferences, distance, and other factors affecting whether trade occurs. The restricted model was completed 2 years ago. It allowed exporters to switch in reaction to changes in exporter FMD status and importer Sanitary Policy but only allowed switching among trade partners within the period. That is, exporter A and importer B could switch from being trade partners if A changed FMD status and/or B changed Sanitary Policy provided that A and B were significant trade partners during the analysis period. However, A could not export to C, nor B import from D if C and D had never traded with A and B during the period. We then estimated a global model which allowed complete switching of trading relationships among all major beef exporters and importers. This work is ongoing as we have had difficulty getting the model to converge in many runs. We participated in an international workshop to identify research and teaching priorities regarding use of economic analysis on animal health issues. We presented a paper at this workshop on economic analysis in US animal health policy formulation, emphasizing that although law requires economic analysis of all major animal health issues, the US makes better use of this for some problems than for others. The main program diseases like brucellosis and tuberculosis are well understood and economics has been used to identify key policy aspects. There are, however, major problems from rapidly progressing viral diseases such as FMD, Newcastle, and avian influenza, that have potentially large economic and social effects, but whose appearance and impact are highly uncertain. In these cases it is difficult to obtain sufficient support to maintain an adequate analysis over time, with most interest occurring when there is an active scare present in the world including the US. Analysis usually focuses on purely economic issues such as costs of different types of outputs, contingent on disease behavior, but rarely focuses on how costs might be reduced if producers and processors agreed ex ante about goals, or perhaps between exporting and importing countries, given trade disruptions accounting for a large proportion of total expected costs from disease outbreaks. Coordination among trading partners, including education of producers and consumers, might eventually lead to improved policy formulation with mutual benefit. However, the political issues involved are difficult. The Republic of Korea (ROK) and the US signed a free trade agreement (KORUS FTA) on 4/1/07, which is expected to significantly reduce the tariff that ROK imposes on US beef imports. The agreement must be approved by each country's legislature before implementation. Once approved, it will gradually eliminate high tariffs on most Calif. agricultural products exported to ROK. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Nothing significant to report during this reporting period. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
Already, with the tariffs in place, Korea ranks among the top six destinations for many California agricultural exports. This project explores the importance of the Korean export market for California agriculture and the nature of current trade barriers; shows the schedule for removing tariffs; and explains how the new tariffs arrangement will affect the competitive position of California agricultural exports relative to Korean products and other countries' exports to Korea. Our analysis indicates that more open access to the Korean market will create significant opportunities for major commodities produced in California, including meat products. Although Korea already has an almost open border for many field crops - with the important exception of rice - it has high trade barriers for many vegetables, fruits and animal products that are important in California agriculture. Under KORUS FTA, California has substantial potential to expand its exports of agricultural commodities to Korea. Lower trade barriers will allow California agriculture to compete in a large, growing and lucrative market. Commodity prices are high in Korea, and consumers are willing to pay premiums for the high-quality products produced in California. If KORUS FTA is implemented, California agriculture should be in an excellent position to compete on both price and quality.
Publications
- Lee, Hyunok, and Sumner, Daniel, 2009, "The Prospective Free Trade Agreement with Korea: Background, Analysis, and Perspectives for California Agriculture," Giannini Foundation Information Series Report 09-2, University of California, Agriculture and Natural Resources, pp.1-60.
- Lee, Hyunok, and Sumner, Daniel, 2011, "Korea-U.S. free trade agreement will lower export barriers for California products," forthcoming, California Agriculture, University of California, Division of Agriculture and Natural Resources.
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Progress 01/01/09 to 12/31/09
Outputs
OUTPUTS: South Korea and the United States signed a free trade agreement (FTA) on April 1, 2007 after an intensive year-long negotiation process. To better understand the potential for implementation and the likely impacts of the negotiated agreement, this study provides detailed information on the access improvement under the FTA between Korea and the United States (KORUS FTA) and potential effects of the KORUS-FTA for California agriculture on a commodity-by-commodity basis. It also reviews the existing trade barriers that limit exports to Korea, considers explicitly the export positions of major competitors and examines the size of the Korean market for each commodity. This information helps us assess the degree to which agricultural exports to Korea have been constrained by trade barriers and the potential additional exports that the Korean market can absorb. PARTICIPANTS: Nothing significant to report during this reporting period. TARGET AUDIENCES: Target audiences include California policy makers, California farmers and farm organizations, and other observers interested in agricultural trade. PROJECT MODIFICATIONS: Not relevant to this project.
Impacts
Research information generated from our study helps us assess the degree to which agricultural exports to Korea have been constrained by trade barriers and the potential additional exports that the Korean market can absorb. We find that better access to the Korean market would create significant opportunities for dozens of major commodities. California has the potential to more than double the current exports of about $280 million within a few years, and to continue expanding exports as barriers fall gradually on products that are politically sensitive in Korea. For example, lower tariffs and fewer other barriers would allow important export expansion for citrus products, tree nuts, dairy products, beef, grapes and grape products, stone fruits, strawberries, fresh and processed vegetables, flowers and ornamental horticulture, processed tomato products, olives, hides and skins, cotton and hay. Expanded agricultural output to serve expanded demand for California products in Korea will also cause additions farm employment and expansion of the agricultural economy past the farm gate.
Publications
- Hyunok lee and Daniel Sumner. 2009 The Prospective Free Trade Agreement with Korea: Background, Analysis and Perspectives for California Agriculture Giannini Foundation Information Series Report 09-2, June 2009, University of California.
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Progress 01/01/08 to 12/31/08
Outputs
OUTPUTS: We continued efforts to refine the two step quantitative model being used to analyze the effect of Foot and Mouth Disease (FMD) on international beef markets over time. The model has been discussed in previous reports. We estimated two models that differ in treatment of exporter and importer pairs in order to determine how best to predict the effect of changes in FMD status and/or in importer sanitary policy on the beef trade patterns and export prices achieved. In the global model, all major importers are considered potential importers from every exporter. This model allows for greater changes in trading patterns in response to changes in the FMD status- and sanitary status-related variables. However, this model has large dimension and many observations (97,344), of which only 16,505 involve trade. Many exporters and importers do not trade with each other, trade only one category of beef or trade only rarely. Thus many observations are zero (no trade). As a result of the high proportion of zero observations, the probit equation tends to overpredict no trade. In the restricted model, each exporter can sell only to countries that have been a principal importer during the period observed. The smaller model has 30,576 observations, with trade observed in 16,505 cases, and the probit estimates provide plausible predictions regarding trade for Brazil and, especially, Uruguay. We use both models to simulate the effect of changes in FMD status on trading relationships and on the average prices received by Brazil and Uruguay, with the latter effect divided between the effect through market access and the effect through beef "quality." The restricted model performs better, but changes in exporter FMD status or importer sanitary policy can cause changes in the predicted trading relationships only among countries that have engaged in significant trade at some time in the period. The model simulates the effect of changes well for Uruguay, which shifted FMD status several times during the period. Moreover some of Uruguay's trading partners changed their sanitary policy from zero tolerance to minimum risk" during the period and these importers resumed trade with Uruguay once it brought FMD under control even though it continued to vaccinate against FMD. In contrast, Brazil has been FMD compromised throughout the entire period and although it brought FMD increasingly under control, eventually becoming FMD free with vaccination, it never gained significant access to importers that practiced either zero tolerance or minimum risk. Use of the restricted model to simulate Brazil's trade does not work as well. We continue efforts to refine the results. PARTICIPANTS: Lovell S. Jarvis, Professor, Department of Agricultural and Resource Economics, University of California, Davis, CA Hyunok Lee, Professional Researcher, Department of Agricultural and Resource Economics, University of California, Davis, CA Daniel A. Sumner, Professor, Department of Agricultural and Resource Economics, University of California, Davis, CA Sebastian Pouliot, previously PhD candidate and now PhD, Department of Agricultural and Resource Economics, University of California, Davis Jose P. Cancino, Assistant Professor, Departamento de Economia Agraria, Pontificia Universidad Catolica de Santiago, Chile. TARGET AUDIENCES: Agricultural economists, particularly those interested in international trade; policy makers in countries that export or import substantial quantities of beef, whether concerned with economic policy or sanitary policy; beef producers; beef processors; beef consumers. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.
Impacts
The research indicates that FMD in exporting countries decreases market access, but by less than previous studies have found. Moreover, the presence of FMD in a beef exporting country seems to have a greater effect on export price by decreasing the price at which the beef is sold in markets to which the exporting country has access, than by reducing the number of countries to which the exporting country has access. This was an unexpected result and the major effect has been thought to occur via importer sanctions. Beef from exporting countries whose FMD status is compromised may appear to sell at a low price because such countries produce and export lower quality beef and the quality variables used are insufficiently accurate to pick up the entire effect, leaving some of this effect to be captured spuriously by the FMD status variables. Alternatively, the discounted price effect could appear because an unexpected outbreak of FMD could cause an exporting country to sell beef at discounted prices in markets to which it does not normally export so much beef. Model results also suggest that the US and Canada use sanitary policy to preclude beef imports from Brazil even though there is little scientific evidence to justify such exclusion, and though these countries import beef with countries with highly similar FMD status, e.g., Argentina and Uruguay. Thus, it appears that sanitary policy is still being used as commercial policy, albeit to a less degree than some years ago, despite agreements to the contrary.
Publications
- Sebastien Pouliot, "Traceability and Food Safety: Liability, Reputation, and Willingness to Pay."PhD dissertation, University of California, Davis, Davis, CA, 2008.
- Sebastien Pouliot and Daniel A. Sumner. "Willingness to pay for traceability: evidence from the Quebec cattle traceability system." Dissertation report presentation, IATRC Annual Meeting, Phoenix, Arizona, December 8, 2008.
- Sebastien Pouliot and Daniel A. Sumner. "Market evidence of the value of traceability." Selected paper, NEC-63 and FAMPS Spring 2009 Conference, San Diego, California, February 2, 2009.
- Sebastien Pouliot and Daniel A. Sumner. "Traceability, Liability and Incentives for Food Safety and Quality." American Journal of Agricultural Economics, 2008.
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Progress 01/01/07 to 12/31/07
Outputs
We have used a two step quantitative model to analyze the effect of Foot and Mouth Disease (FMD) on international beef markets over time. Using monthly data from 1990-2002 for 7 major beef exporters and for 22 major beef importers, we use a probit equation to estimate the probability that country i exports to country j, taking account of foot and mouth status of exporter, sanitary policy of importer, beef quality, trade preferences, distance, and other factors affecting whether beef trade occurs. We then use OLS to estimate the export prices that are obtained for beef, taking account of beef quality, country per capita, trading preferences, region, per capita income, and a time trend, including terms to adjust for censorship in the first stage. Using the estimated equations, we compare the predicted change in trading partners and in the prices received by the two exporters in our sample that are not FMD free, Brazil and Uruguay, under the assumption that their status
switches from having FMD to being FMD free. The model performs well. The results suggest that FMD continues to impede trade between many countries and does accordingly reduce the price received for beef from countries with FMD. Nonetheless, the "sanction" from FMD is estimated to be about 25%-30%, smaller than previously believed. The estimated price sanction caused by the existence of FMD in an exporting country is calculated as the sum of the loss shown by 1) the difference between an average of all prices in the predicted trading sets for that country, assuming the country changes FMD status, plus 2), the price decline caused by FMD in markets to which exports occur (from the beef price equation. Surprisingly, we find the that essentially all of the "price" sanction predicted by our model occurs because FMD-compromised exporters sell their beef at lower prices than do FMD-free exporters in those markets to which access is gained, rather than as a result of being excluded from
higher priced markets. Given that the EU, the US and Canada now import beef from countries that are FMD free with vaccination, and that these countries pay relatively high prices, Brazil and, especially, Uruguay had already gained access to relatively high priced markets by the end of the period without achieving FMD eradication. We also participated in a major international workshop to identify priorities for tool development - vaccine characteristics and epidemiology and economics models - in mounting increased international efforts to control FMD.
Impacts
The research indicates that FMD in exporting countries decreases market access, but a number of high price markets now accept deboned beef from countries in which FMD in controlled, e.g., by vaccination, and where beef is processed appropriately. In these countries, imports usually face fairly tight limits due to tariff quotas. In several other high priced markets, beef imports are precluded even though there is little scientific evidence to justify such exclusion. Thus, it appears that sanitary policy is still being used as commercial policy by some countries, despite agreements to the contrary.
Publications
- Albert Acquaye, Julian Alston, Hyunok Lee, and Daniel Sumner. Hurricanes and Invasive Species: the Economics and Spatial Dynamics of Eradication Policies. Chapter 7 in New Approaches to the Economics of Plant Health. Alfons G.J.M. Oude Lansink, (Ed.) Springer Publishing, forthcoming in July 2007.
- Hyunok Lee and Daniel A. Sumner. The Prospective Free Trade Agreement with Korea: Background, Analysis and Perspectives for California Agriculture. Report prepared for the California Farm Bureau Federation. January 2007.
- Jarvis, L.S., and K.M. Rich. 2006. Enabling Technologies and Decision Support Tools for Endemic FMD Control. in Report on Global FMD Technology Development Road Map Workshop, International Livestock Research Institute.
- Jarvis, L.S., Cancino, J.P., and Bervejillo, J.E. 2006. The Effect of Foot and Mouth Disease on Trade and Prices in International Beef Markets (REVISED), Working Paper, Department of Agricultural and Resource Economics, University of California, Davis.
- Rowhani, Omid and Daniel A. Sumner. California s International Agricultural Exports in 2005 AIC Issues Brief, No.31 (April 2007).
- Sebastien Pouliot and Daniel A. Sumner. Traceability, Liability and Incentives for Food Safety and Quality. Forthcoming in: American Journal of Agricultural Economics, (2008).
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Progress 01/01/05 to 12/31/05
Outputs
We found that beef export prices from 17 major beef exporting countries have converged over the period 1980-2002. The price gap between the two traditional market segments, the Foot and Mouth Free (Pacific Region) and the Foot and Mouth endemic (Atlantic Region), appears to have narrowed as traditionally FMD endemic exporters have moved to better control FMD and move increasingly to export boneless beef cuts that do not transmit FMD. Simultaneously, important importers like the US and Canada began to apply a minimum risk sanitary policy and thus accept appropriately-processed deboned beef from countries with some level of FMD. Our research is now focused on identifying econometrically the precise effect of FMD on 1) beef trade among trading partners and 2) on the level of beef export prices received by FMD compromised exporters. We are utilizing monthly data from 1990-2002 on beef exports from major 7 beef exporting countries, two of which have frequently or always
been FMD compromised. Preliminary evidence indicates that the FMD price sanction has decreased significantly from the 50% level that was the long held conventional wisdom, though a significant price sanction still exists. Our research also continues on the design of science based public policy to facilitate negotiations among exporting and importing countries when animal disease outbreaks occur. Both importers and exporters have a welfare interest in resuming trade as quickly as is scientifically appropriate, though this interest is sometimes obscured by the efforts of interest groups to postpone trade resumption. Our research analyzes how these issues have affected discussions between the US and Canada regarding the resumption of beef trade following the discovery of several cases of BSE in Canada and one case in the US.
Impacts
The research is providing evidence to US producers of a growing competitiveness in international beef markets as a result of developments in several beef exporting countries that traditionally have been FMD compromised. These countries are controlling, but not eliminating FMD, but still gaining access to important import markets, including the US and Canada, as a result of a science-based shift in these importer's sanitary policy toward a policy of 'minimum risk,' in which properly processed deboned beef is considered safe for import. The research is also showing that it is economically unwise to impose drastic trade restrictions or disease inspections as a result of discovering very limited BSE outbreaks as the economic/health threat of the latter is very small relative to the implied costs.
Publications
- Daniel A. Sumner. 'Production and Trade Effects of Farm Subsidies: Discussion.' American Journal of Agricultural Economics, (87), 5 (November 2005): 1229-1230.
- Sumner, Daniel A., Jose E. Bervejillo and Lovell S. Jarvis. 'Public Policy, Invasive Species and Animal Disease Management.' International Food and Agribusiness Management Review, 8.1, January 2005.
- Sumner, Daniel A., Jose E. Bervejillo and Lovell S. Jarvis. 'The Role of Public Policy in Animal Disease.' In S.R. Koontz, D.L. Hoag, D.D. Thilmany, J. W. Green, and J.L. Grannis, editors. Livestock Industry Insurance: an International Look at Issues and Cases Studies. CABI Publishers Cambridge MA, 2005 (in press).
- Lovell S. Jarvis, Jose P. Cancino and Jose E. Bervejillo, The Effect of Foot and Mouth Disease on Trade and Prices in International Beef Markets, Selected paper prepared for presentation at the American Agricultural Economics Association annual meeting, Providence, Rhode Island, July 24-27, 2005.
- Lovell S. Jarvis, Jose E. Bervejillo and Jose P. Cancino International Beef Prices : Is There Evidence of Convergence?, Review of Agricultural Economics 27(3), Fall 2005
- Jose P. Bervejillo and Daniel A. Sumner. 'California's International Agricultural Exports in 2004' AIC Issues Brief, No.30 (November 2005). John D. Mullen, Julian M. Alston, Daniel A. Sumner, Marcia T. Kreith, and Nicolai V. Kuminoff. 'The Payoff to Public Investments in Pest-Management R&D: General Issues and aCase Study Emphasizing Integrated Pest Management in California.' Review of Agricultural Economics, (27), 4 (December 2005): 558-573.
- Richard Barichello, Timothy Josling and Daniel A. Sumner. 'Agricultural Trade Disputes Between Canada and the United States: Costly but Diminishing.' 29 pp. C.D. Howe Institute Commentary, No. 224 (December 2005).
- Daniel A. Sumner. 'Boxed In: Conflicts between U.S. Farm Policies and WTO Obligations.' 30pp. Cato Institute Trade Policy Analysis, No. 32 (December 2005). http://www.freetrade.org/pubs/pas/pas.html.
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Progress 01/01/04 to 12/31/04
Outputs
Argentina and Uruguay jointly exported 600,000 tons of beef (cwe) annually in 1997-1999. They both eradicated Foot and Mouth Disease (FMD) in the 1990s. Argentina and Uruguay were expected to export high priced beef to higher income Pacific Rim countries, but they exported primarily inexpensive beef cuts. Gaining access to Pacific Rim markets was expected to result in a sharp increase in the price received for beef exports, but Argentina and Uruguay reported prices increased only 10%-15%. This suggests the gap between prices in FMD free and FMD endemic market segments is smaller than believed. FMD re-entered Argentina and Uruguay from Bolivia and Brazil. Both countries attempted to stamp out the outbreaks, but failed. Eradication is unlikely to be profitable in countries having neighbors in which FMD remains active. Thus, eradication calls for government action to achieve eradication in a natural FMD area, even if this crosses national boundaries and involves multiple
governments. Argentina and Uruguay began vaccinating their entire herds. Although many FMD free countries long excluded beef imports from countries that vaccinated against FMD, some have changed sanitary policies to accept beef from countries with 'minimum risk' since a new Sanitary and Phytosanitary agreement was negotiated pursuant to the Uruguay Round. Minimum risk status generally requires exporting countries control FMD via vaccination (no outbreaks), animals are inspected and slaughtered appropriately, and beef is deboned before export. Since the price differential for FMD free beef is lower than previously expected and since access to many previously closed markets is available to minimum risk exporting countries, we conclude the incentive to eradicate FMD has declined. Since it appears that improved vaccines, communications, and farmer skills are making vaccination less costly and more effective, FMD eradication may be profitable solely to reduce production losses. Using
standard convergence theory, we find that average export prices of major beef exporters have been converging since the early 1980s. We have tested this hypothesis using annual data for the largest 17 beef exporters for 1960-2002 and monthly data for the 7 largest beef exporters for 1990-2002. Judging from the results using sub sets of countries, convergence is occurring as a result of a shrinking premium between prices in the FMD free and FMD endemic markets, and because of a liberalization of beef markets following the Uruguay Round. In particular, US prices have been declining toward the mean as Japan and South Korea have liberalized their markets, allowing greater entry to Australia and New Zealand. We are estimating the welfare gains associated with the observed convergence. We have prepared a draft paper on Bovine spongiform encephalophy (BSE) arguing that threats of transmission into the US food chain is now very small given changes in policy that limit sources of transmission.
Accordingly, the economic and health threat to the US currently appears very small even though one case has occurred.
Impacts
Argentina and Uruguay have latent potential to become important exporters to FMD-free markets. Both countries could be tough competitors for the US in foreign markets, though currently Argentina and Uruguay export mainly grass fed beef that is significantly differentiated from the grain fed beef exported normally by the US. The US could also import from Argentina and Uruguay, benefiting US consumers. BSE is not a threat to the US herd or to US consumers at this time.
Publications
- Ekboir, J., L.S. Jarvis and J. E. Bervejillo. 2003. 'Evaluating the Potential Impact of a Food and Mouth Disease Outbreak,' Exotic Pests and Diseases: Biology and Economics for Biosecurity, Ames: Iowa State Press, 2003.
- Bervejillo, J.E., and L.S. Jarvis, 2003. 'Bovine Spongiform Encephalopathy: Lessons From the United Kingdom,' Exotic Pests and Diseases: Biology and Economics for Biosecurity, Ames: Iowa State Press, 2003.
- Ekboir, J., L.S. Jarvis, D.A. Sumner, J.E. Bervejillo and W.R. Sutton. 2002. 'Changes in Foot and Mouth Disease Status and Evolving World Beef Markets,' Agribusiness, 18 (2):213-229.
- Jarvis, L.S., J.E. Bervejillo , J. Ekboir, D.A. Sumner, and W.R. Sutton. 2001. 'South-of-the-Border Beef: Changing Beef Industries in Argentina and Uruguay,' Choices, Third Quarter 2001: 30-33.
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Progress 01/01/03 to 12/31/03
Outputs
Jarvis and Bervejillo completed new study to evaluate effect of 2001 FMD outbreak in Argentina and Uruguay. Canada, Mexico and the US have adopted 'minimum risk' as opposed to 'zero tolerance' as their sanitary criteria governing beef imports. This new policy makes it more profitable for beef exporters to continue vaccination rather than seek eradication, since they can now export a large range of products to FMD-free countries that previously would not accept them. Current efforts to regain lost markets follow a new approach. Rather than eradicate FMD, countries are vaccinating and will continue until entire region is safe. Canada reopened its market to Uruguayan imports in late 2002. During the first semester of 2003, Uruguay exported more than 30 TMT of fresh beef to Canada, a new record high in volume. The US market opened in June 2003. Mexico is expected to follow soon. The main lesson learned from the process of FMD eradication in Argentina and Uruguay is that
it is difficult to eradicate FMD and maintain FMD-free status if FMD is present in a neighboring country, particularly where border controls on animal movements are weak and where human migration (trucks, cars, people) is frequent. Countries wishing to rid themselves or remain free of FMD thus have great incentive to promote regional eradication. For countries that cannot currently expect to eradicate FMD, the existence of markets where 'minimum risk' is accepted makes it more profitable for them to continue with widespread vaccination rather than simply live with endemic FMD. It seems likely that additional countries will adopt the 'minimum risk' criteria, particularly as this is the scientific standard now accepted by the WTO. If so, this will promote a change in the way that most developing countries think about FMD, and vaccination will become the policy of choice, at least until eradication with vaccination is so widespread as to allow all to consider ceasing vaccination. Jarvis,
Bervejillo and Cancino have analyzed international beef prices to determine whether there is growing convergence over time. Using several methodologies, they find that convergence is occurring. The result holds using different time periods, different types of beef and beef cuts, and the consideration of different country groups. The results thus suggest growing integration of markets even though beef trade flows remain largely separated between the Pacific and Atlantic markets. We have also collected monthly data from 8 countries, disaggregated by beef type (HMS categories) and by market of destination, and are carrying out an econometric analysis of the effects of beef characteristics, market, and time, in order to identify the effect of FMD and other characteristics on beef price.
Impacts
Research results will provide US and California beef producers with the 'prices' of different meat characteristics (e.g., type of cut, grain vs. grass fed, and existence of FMD) in international markets, how these have been changing, and why. These results will help us understand why US beef producers have received prices that are higher than those received by other beef producers. The research is of interest to cow-calf and feed lot operators, beef exporters, and agencies concerned with domestic beef production and exports.
Publications
- J. Ekboir J., L.S. Jarvis and J. Bervejillo. 2003. 'Potential Impact of Foot and Mouth Disease Outbreak in California,' in Exotic Pests and Diseases.' D.A. Sumner, ed., Iowa State University Press.
- Jarvis, L.S. and J. Bervejillo. 2003. 'Bovine Spongiform Encephalopathy: Lessons from the United Kingdom.' in Exotic Pests and Diseases. D.A. Sumner, ed. Iowa State University Press.
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Progress 01/01/02 to 12/31/02
Outputs
Following successful eradication of FMD in Uruguay (1995) and Argentina (2000), both countries suffered new outbreaks of FMD in early 2001 that apparently occurred as the result of infected cattle entering Argentina from Paraguay. The outbreak was not controlled and, indeed, may have been occulted for some time, contributing to its spread. Both Argentina and Uruguay lost access to the FMD-free markets that they had previously gained and the livestock industries in both countries suffered badly as a result. However, Uruguay was able to control the FMD outbreak quickly and, by November 2001, had regained approval to export fresh beef to Canada. Other markets should follow. Following a benign winter and a very large calf crop, the Uruguayan livestock sector is in surprisingly good condition given the previous loss of important markets. We plan a new study to evaluate the effect of the outbreak. The Argentine livestock industry is in much less solid condition as it has
not regained external markets and the domestic market, which accounted for 90% of output, is severely depressed by an economic recession. We completed revisions of two papers, one estimating the cost of an FMD outbreak in California, with policy recommendations to suggest consideration of ring-vaccination instead of stamping out in the event of a California outbreak, and the other estimating the cost of an outbreak of Bovine spongiform encephalophy (BSE), with policy recommendations.
Impacts
Argentina and Uruguay have latent potential to become important exporters to FMD-free markets. Both countries could be tough competitors for the US in foreign markets, though currently Argentina and Uruguay export mainly grass fed beef that is significantly differentiated from the grain fed beef exported normally by the US. The US could also import from Argentina and Uruguay, benefiting US consumers. BSE is not a threat to the US herd or to US consumers at this time.
Publications
- No publications reported this period
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Progress 01/01/01 to 12/31/01
Outputs
Following successful eradication of FMD in Uruguay (1995) and Argentina (2000), we interviews with producers, processors/exporters, academics and government officials in the two countries and collected and analyzed industry and international beef market data to determine the domestic and international effects of such eradication. We found that both countries steadily gained access to FMD-free markets in the Pacific Rim through end 2000. Uruguay managed to expand exports without reducing exports to its traditional FMD-endemic markets, due to rising production. Argentina had not increased exports to FMD-free markets sufficiently by end-2000 to cause a conflict with its traditional markets. Eradication seemed to be associated with a 10%-15% increase in domestic prices, and international prices were affected less. In both cases, these short run effects are much smaller than the effects that had been predicted by long-run models. However, research indicates that Uruguay
and, especially, Argentina have capacity to significantly expand production, reduce consumption in response to higher prices and increase beef exports. Argentina is constrained by the tastes of domestic consumers from producing the type of beef that is preferred by higher-priced northern hemisphere markets, though it has the resource base to produce such beef and is likely to become a major competitor of the US in the long run. Following lessons learned from the FMD outbreak in the UK, we revised a paper on the cost of and FMD outbreak in California and altered policy recommendations to suggest consideration of ring-vaccination instead of stamping out in the event of a California outbreak. This paper was presented to Congressional staff members. We have prepared a draft paper on Bovine spongiform encephalophy (BSE)arguing that the threat of transmission into the US food chain is now very small given changes in policy that limit sources of transmission. Accordingly, the economic and
health threat to the US currently appears very small.
Impacts
Argentina and Uruguay have latent potential to become important exporters to FMD-free markets. Both countries could be tough competitors for the US in foreign markets, though currently Argentina and Uruguay export mainly grass fed beef that is significantly differentiated from the grain fed beef exported normally by the US. The US could also import from Argentina and Uruguay, benefiting US consumers. BSE is not a threat to the US herd or to US consumers at this time.
Publications
- Ekboir, J., Jarvis, L.S. Sumner, D.A., Bervejillo, J.A., Sutton, W.R.. "Changes in Foot and Mouth Disease Status in World Beef Markets," Agribusiness: An International Journal. Vol. 18, No. 2. (Spring 2002.)
- Jarvis, L.S., J.E. Bervejillo, Ekboir, J., Sumner, D.A., and Sutton, W.R.. 2001. "World Beef Markets and Changing Beef Industries in Argentina and Uruguay," Choices, Fall Quarter.
- Ekboir, J., Jarvis, L.S., and Bervejilllo, J.E. "The Potential Impact of FMD in California," presented to US Congressional Staff, Congressional Staff Tour, College of Agricultural and Environmental Sciences, University of California, Davis, October, 2000.
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Progress 01/01/00 to 12/31/00
Outputs
Two papers were written that presented estimates of the costs of outbreaks in California of 1) Bovine spongiform encephalopathy (BSE), and 2) Food and Mouth Disease (FMD). An outbreak of each disease would impose huge costs. Each disease would impact domestic demand and trade, raise long run supply costs, and impose costs to control and/or eradicate the diseases. Strategies to address the threat of BSE for the California should focus on preventing entry, improving surveillance to identify BSE early if it enters, and preventing the spread of BSE in the US herd and human population. Policy issues relate to reviewing compliance of feed processing procedures and developing an individual animal identification system. Strategies to address the threat of FMD in California should focus on improving surveillance to identify FMD early if an outbreak occurs and to impose an effective quarantine and a stamping out or vaccination program.
Impacts
BSE spread from the United Kingdom into Western Europe despite slaughter of infected animals, control of live animal movements, and mandated restrictions on animal feeding practices. Changes are needed in US animal production practices to reduce the probability that BSE spreads to the US and becomes diffused throughout the US cattle herd.
Publications
- Sumner, D. A. 1999. [Remarks on economic and public policy aspects of exotic pest control]. Exotic pests and diseases : biology, economics, public policy / Raymond H. Coppock and Marcia Kreith, editors. Davis : University of California, Agricultural Issues Center, pp. 7-8, 22-30, 31.
- Jarvis, L. S. 1999. [Remarks on foot-and-mouth disease]. Exotic pests and diseases : biology, economics, public policy / Raymond H. Coppock and Marcia Kreith, editors. Davis : University of California, Agricultural Issues Center, pp. 167-172, 181-182.
- Jarvis, L. S. 1999. [Remarks on bovine spongiform encephalopathy]. Exotic pests and diseases : biology, economics, public policy / Raymond H. Coppock and Marcia Kreith, editors. Davis : University of California, Agricultural Issues Center, pp. 206-209, 212, 213.
- Jarvis, L. S. and Bervejillo, J. E. 2000. Re-emergence of South American beef exporters : new competition for U.S. producers? Agricultural and Resource Economics Update 4(1):1-4.
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Progress 01/01/99 to 12/31/99
Outputs
Working with other AES and School of Veterinary Medicine faculty, analyzed 1) the potential likelihood of an outbreak of Bovine Spongiform Encephalophy (BSE), its likely health and economic effects if such an outbreak occurred, and the principle policies that should be implemented to reduce the possible costs of an outbreak, and 2) analyzed the economic effect on California and the US of a Foot-and-Mouth Disease (FMD) outbreak occurring in California, with different assumptions regarding the policies implemented in California in response. Much of this work is based on Ekboir (1999). The results indicated the crucial nature of a very early identification of the disease, imposition of quarantine, the expected severe logistical difficulties of animal disposal, and the need for additional detailed analysis to determine whether a policy of stamping out should be uniformly preferred to one of quarantine, vaccination and gradual eradication.
Impacts
The studies were discussed with state officials, especially those from the CFDA, and they have begun to make certain policy changes in response.
Publications
- Ardans, M. Thurmond, A. Edmondson, D. Klingborg, T. Jarvis. 1999. In Exotic Pest and Disease Policy Study, UC AGRICULTURAL ISSUES CENTER, University of California, Davis.
- Ekboir, Javier. 1999. The Effect of a Foot and Mouth Disease Outbreak in California, UC AGRICULTURAL ISSUES CENTER, University of California, Davis.
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