Disasters, FMD and Food Security: Macroeconomic Responses to Large Scale Disruptions of U.S. Food Production

Abstract

Without question, it was the 9/11 attacks and subsequent anthrax incidents that sounded the alarm that deliberate contamination of the nation’s food supply is a real possibility. Some foods are more susceptible to deliberate contamination than others, but there is no practical way one can completely eliminate the possibility of being affected. Furthermore, while the psychological implications of an attack on the food supply are sobering, many of the human and economic dimensions of such an event are indistinguishable from those that would occur in the wake of a natural food contamination event. And, not surprisingly, the effects can be significant and wide spread.

To contribute to this policy research agenda, we forecast the economic consequences of a major, but hypothetical, event leading to widespread contamination of the food system. For the simulation, we assume that there is an outbreak of foot-and-mouth disease (FMD). Our choice is based primarily on the fact that it would be reasonably easy to transport the disease into the United States, and to disseminate it among feedlots and farms across the country.

Since the immediate effect of this disease on the productivity of the livestock sector could also have a potentially disastrous effect on the entire supply chain and U.S. exports of livestock, meat, and dairy products depending upon the extent of the outbreak, and the global response to it, we measure these impacts within the context of a computable general equilibrium (CGE) model of the global economy. The immediate impacts of FMD are modeled as “shocks“ to the outputs of the U.S. livestock, raw milk and other animal products sectors (which includes swine and poultry). These shocks, in turn, result in indirect impacts on all sectors throughout the U. S. economy. There are indirect effects in international markets as well, and these impacts on trade are particularly significant if one assumes that there is a complete ban on exports of livestock, animal products, meat, and dairy products from the United States to all FMD-free regions. In calibrating our initial shocks, we account explicitly for the fact that some primary factors of agricultural production, such as land and capital, are only partially mobile between sectors, particularly in the short run, and perhaps for some specialized resources in the longer run as well. We conduct the empirical analysis using GTAP, a multi-region, multi-sector computable general equilibrium model of the global economy.

Keywords: Foot and Mouth Disease, FMD, Agroterrorism, GTAP, CGE,Regional Economic Model

JEL Classification: D57, D58, F17, Q10, Q11