The Economic Impacts of Avian Influenza on World Poultry Trade and the U.S. Poultry Industry: A Spatial Equilibrium Analysis

Article excerpt

Simulation results showed that simultaneous outbreaks of highly pathogenic avian influenza (HPAI) in Asia, the United States, Brazil, and selected European countries will have significant impacts on world poultry trade. Assuming demand for chicken meat is constant, the global export price is simulated to increase by 9.63%. HPAI outbreaks in the United States, Economic Union, and Brazil will have a greater impact on export price than in any other possible three-region case. Outbreaks in the United States and Brazil would still lead to major impacts on world poultry trade, confirming large country effects.

Key Words: birds flu, Centers for Disease Control and Prevention, economic impacts, H5N1, HPAI disease, spatial equilibrium, U.S. poultry industry, world chicken trade

JEL Classifications: Q17, Q11, Q18, F14, F17, F47

Introduction

Avian influenza viruses occur naturally among wild birds and often cause only very mild symptoms from which the birds rapidly recover. However, there are many different subtypes of influenza. Highly pathogenic avian influenza (HPAI) is an extremely infectious and fatal form of the disease that affects multiple organs and can reach mortality rates of 90% or greater in domesticated poultry, often within 48 hours of infection (CDC). Most recently, one type of HPAI known as AH5N1 or H5N1 has been responsible for disease outbreaks in poultry and/or wild birds in 46 countries. The H5N1 strain was first identified in Hong Kong and has been spread from Asia to Europe and Africa through the movement of migratory birds. Since 2003, tens of millions of birds (mostly chickens and ducks on farms) have died or been culled because of HPAI outbreaks, which has resulted in severe impacts on the poultry sector in multiple countries, primarily in Southeast Asia. In addition to the direct impacts of culling on poultry production, there are large effects on consumption as many consumers reduce poultry consumption because of the negative publicity and fears of contracting disease. FAO reported February 2006 declines in poultry consumption of 70% in Italy, 20% in France, and 10% in northern Europe related to European HPAI outbreaks in poultry (FAO 2006). Countries involved in poultry trade are being significantly impacted even if they have not experienced an outbreak of HPAI within their borders.

There is also concern that the H5N1 virus could mutate into a form that can be passed from human to human, which would pose a significant risk of leading to a global pandemic. Policymakers and industry decision makers are very concerned about preventing and controlling the disease because of its substantial economic impacts and the potential devastation beyond the agriculture sector. Livestock management is critical to controlling the spread of the disease in poultry as well as delaying, minimizing, or avoiding a potential global pandemic. Prevention and control strategies can help mitigate the economic impacts of HPAI, but there are significant costs associated with these strategies. Improved biosecurity practices are very important in preventing infection in domesticated poultry. Because the virus is highly contagious in poultry, the most common method of control after an outbreak has been discovered is depopulating the entire infected flock and possibly additional flocks located in proximity to the infected one. An important consideration is the structure of compensation programs to provide incentives for farmers to report outbreaks and cooperate when flock culling is necessary.

It is very important to assess the impacts of HPAI on poultry production and consumption as well as the costs and benefits of prevention and control strategies. This assessment enables us to better understand the magnitude of the problem and to inform policymakers regarding development of effective prevention and control policies and programs to minimize the negative economic impacts of the disease.

There are many possible approaches for analyzing the potential impact of HPAI on world chicken trade and an infinite number of potential scenarios. …